Correlation Between Ford and KSM Mutual

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

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

Diversification Opportunities for Ford and KSM Mutual

0.33

Correlation Coefficient

Ford  KSM Mutual

Weak diversification

The 3 months correlation between Ford and KSM is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and KSM Mutual Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KSM Mutual Funds 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 KSM Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KSM Mutual Funds has no effect on the direction of Ford i.e., Ford and KSM Mutual go up and down completely randomly.

Pair Corralation between Ford and KSM Mutual

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the KSM Mutual. In addition to that, Ford is 15.24 times more volatile than KSM Mutual Funds. It trades about -0.13 of its total potential returns per unit of risk. KSM Mutual Funds is currently generating about 0.42 per unit of volatility. If you would invest  376,730  in KSM Mutual Funds on February 22, 2024 and sell it today you would earn a total of  2,194  from holding KSM Mutual Funds or generate 0.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	63.64%
Values	Daily Returns

Ford Motor  vs.  KSM Mutual Funds

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

KSM Mutual Funds

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KSM Mutual Funds are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, KSM Mutual 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 KSM Mutual

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

The idea behind Ford Motor and KSM Mutual Funds 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.