Correlation Between Ford and AVIC UAS

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

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

Diversification Opportunities for Ford and AVIC UAS

0.26

Correlation Coefficient

Ford  AVIC UAS

Modest diversification

The 3 months correlation between Ford and AVIC is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AVIC UAS Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVIC UAS 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 AVIC UAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVIC UAS has no effect on the direction of Ford i.e., Ford and AVIC UAS go up and down completely randomly.

Pair Corralation between Ford and AVIC UAS

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.47 times more return on investment than AVIC UAS. However, Ford Motor is 2.14 times less risky than AVIC UAS. It trades about -0.01 of its potential returns per unit of risk. AVIC UAS Co is currently generating about -0.07 per unit of risk. If you would invest  1,015  in Ford Motor on October 1, 2024 and sell it today you would lose (12.00) from holding Ford Motor or give up 1.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.35%
Values	Daily Returns

Ford Motor  vs.  AVIC UAS Co

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

AVIC UAS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AVIC UAS Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AVIC UAS 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 AVIC UAS

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

The idea behind Ford Motor and AVIC UAS Co 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.