Correlation Between Ford and Faraday Future

Can any of the company-specific risk be diversified away by investing in both Ford and Faraday Future at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ford and Faraday Future into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and Faraday Future Intelligent, you can compare the effects of market volatilities on Ford and Faraday Future and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ford with a short position of Faraday Future. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Faraday Future.

Diversification Opportunities for Ford and Faraday Future

-0.76

Correlation Coefficient

Ford  Faraday Future

Pay attention - limited upside

The 3 months correlation between Ford and Faraday is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Faraday Future Intelligent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Future Intel and Ford is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ford Motor are associated (or correlated) with Faraday Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Future Intel has no effect on the direction of Ford i.e., Ford and Faraday Future go up and down completely randomly.

Pair Corralation between Ford and Faraday Future

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.21 times more return on investment than Faraday Future. However, Ford Motor is 4.75 times less risky than Faraday Future. It trades about 0.02 of its potential returns per unit of risk. Faraday Future Intelligent is currently generating about -0.1 per unit of risk. If you would invest  1,228  in Ford Motor on January 26, 2024 and sell it today you would earn a total of  67.00  from holding Ford Motor or generate 5.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Faraday Future Intelligent

Ford Motor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Ford reported solid returns over the last few months and may actually be approaching a breakup point.

Faraday Future Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faraday Future Intelligent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ford and Faraday Future

The main advantage of trading using opposite Ford and Faraday Future positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Faraday Future can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Faraday Future will offset losses from the drop in Faraday Future's long position.

The idea behind Ford Motor and Faraday Future Intelligent pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.