Correlation Between Ford and Microsoft Corp

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

Specify exactly 2 symbols:

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

Diversification Opportunities for Ford and Microsoft Corp

0.89
  Correlation Coefficient
Ford Motor
Microsoft Corp

Very poor diversification

The 3 months correlation between Ford and Microsoft is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Microsoft Corp in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp 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 Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp has no effect on the direction of Ford i.e., Ford and Microsoft Corp go up and down completely randomly.

Pair Corralation between Ford and Microsoft Corp

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.43 times more return on investment than Microsoft Corp. However, Ford is 1.43 times more volatile than Microsoft Corp. It trades about 0.07 of its potential returns per unit of risk. Microsoft Corp is currently generating about 0.08 per unit of risk. If you would invest  881.00  in Ford Motor on August 30, 2021 and sell it today you would earn a total of  1,094  from holding Ford Motor or generate 124.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Microsoft Corp

 Performance (%) 
      Timeline 
Ford Motor 
Ford Performance
20 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Ford exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ford Price Channel

Microsoft Corp 
Microsoft Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft Corp may actually be approaching a critical reversion point that can send shares even higher in December 2021.

Microsoft Price Channel

Ford and Microsoft Corp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Ford and Microsoft Corp

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

Ford Motor

Pair trading matchups for Ford

The idea behind Ford Motor and Microsoft Corp 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.

Microsoft Corp

Pair trading matchups for Microsoft Corp

Check out your portfolio center. 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

Other Complementary Tools

Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account
Go
Balance Of Power
Check stock momentum by analyzing Balance Of Power indicator and other technical ratios
Go
Analyst Recommendations
Analyst recommendations and target price estimates broken down by several categories
Go
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Go
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Go