Correlation Between Ford and NEX POINT

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

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

Diversification Opportunities for Ford and NEX POINT

0.13

Correlation Coefficient

Ford  NEX POINT

Average diversification

The 3 months correlation between Ford and NEX is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and NEX POINT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEX POINT 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 NEX POINT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEX POINT has no effect on the direction of Ford i.e., Ford and NEX POINT go up and down completely randomly.

Pair Corralation between Ford and NEX POINT

Taking into account the 90-day investment horizon Ford is expected to generate 14.19 times less return on investment than NEX POINT. But when comparing it to its historical volatility, Ford Motor is 9.82 times less risky than NEX POINT. It trades about 0.02 of its potential returns per unit of risk. NEX POINT is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  234.00  in NEX POINT on September 14, 2024 and sell it today you would lose (161.00) from holding NEX POINT or give up 68.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.65%
Values	Daily Returns

Ford Motor  vs.  NEX POINT

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

NEX POINT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEX POINT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ford and NEX POINT

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

The idea behind Ford Motor and NEX POINT 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.

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 the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.