Correlation Between Ford and Victory Supermarket

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

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

Diversification Opportunities for Ford and Victory Supermarket

0.69

Correlation Coefficient

Ford  Victory Supermarket

Poor diversification

The 3 months correlation between Ford and Victory is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Victory Supermarket Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Supermarket Chain 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 Victory Supermarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Supermarket Chain has no effect on the direction of Ford i.e., Ford and Victory Supermarket go up and down completely randomly.

Pair Corralation between Ford and Victory Supermarket

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.24 times more return on investment than Victory Supermarket. However, Ford is 1.24 times more volatile than Victory Supermarket Chain. It trades about 0.09 of its potential returns per unit of risk. Victory Supermarket Chain is currently generating about 0.1 per unit of risk. If you would invest  1,244  in Ford Motor on January 26, 2024 and sell it today you would earn a total of  51.00  from holding Ford Motor or generate 4.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	76.19%
Values	Daily Returns

Ford Motor  vs.  Victory Supermarket Chain

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 unfluctuating technical and fundamental indicators, Ford reported solid returns over the last few months and may actually be approaching a breakup point.

Victory Supermarket Chain

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Supermarket Chain are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Victory Supermarket sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Victory Supermarket

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

The idea behind Ford Motor and Victory Supermarket Chain 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.