Correlation Between Ford and RCF Acquisition

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

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

Diversification Opportunities for Ford and RCF Acquisition

0.58

Correlation Coefficient

Ford  RCF Acquisition

Very weak diversification

The 3 months correlation between Ford and RCF is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and RCF Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCF Acquisition 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 RCF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCF Acquisition Corp has no effect on the direction of Ford i.e., Ford and RCF Acquisition go up and down completely randomly.

Pair Corralation between Ford and RCF Acquisition

Taking into account the 90-day investment horizon Ford Motor is expected to generate 13.1 times more return on investment than RCF Acquisition. However, Ford is 13.1 times more volatile than RCF Acquisition Corp. It trades about 0.02 of its potential returns per unit of risk. RCF Acquisition Corp is currently generating about 0.15 per unit of risk. If you would invest  1,290  in Ford Motor on January 24, 2024 and sell it today you would earn a total of  4.00  from holding Ford Motor or generate 0.31% return on investment over 90 days.

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

Ford Motor  vs.  RCF Acquisition Corp

Ford Motor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford reported solid returns over the last few months and may actually be approaching a breakup point.

RCF Acquisition Corp

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCF Acquisition Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, RCF Acquisition is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and RCF Acquisition

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

The idea behind Ford Motor and RCF Acquisition 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.

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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.