Correlation Between Ford and Le Gaga

Can any of the company-specific risk be diversified away by investing in both Ford and Le Gaga 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 Le Gaga into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and Le Gaga Holdings, you can compare the effects of market volatilities on Ford and Le Gaga 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 Le Gaga. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Le Gaga.

Diversification Opportunities for Ford and Le Gaga

0.0

Correlation Coefficient

Ford  Le Gaga

Pay attention - limited upside

The 3 months correlation between Ford and GAGA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Le Gaga Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Le Gaga Holdings 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 Le Gaga. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Le Gaga Holdings has no effect on the direction of Ford i.e., Ford and Le Gaga go up and down completely randomly.

Pair Corralation between Ford and Le Gaga

If you would invest  0.00  in Le Gaga Holdings on January 30, 2024 and sell it today you would earn a total of  0.00  from holding Le Gaga Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Ford Motor  vs.  Le Gaga Holdings

Ford Motor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Le Gaga Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Le Gaga Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Le Gaga is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Le Gaga

The main advantage of trading using opposite Ford and Le Gaga positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Le Gaga 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 Le Gaga will offset losses from the drop in Le Gaga's long position.

The idea behind Ford Motor and Le Gaga Holdings 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.