Correlation Between Ford and NervGen Pharma

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

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

Diversification Opportunities for Ford and NervGen Pharma

0.05

Correlation Coefficient

Ford  NervGen Pharma

Significant diversification

The 3 months correlation between Ford and NervGen is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and NervGen Pharma Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NervGen Pharma 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 NervGen Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NervGen Pharma Corp has no effect on the direction of Ford i.e., Ford and NervGen Pharma go up and down completely randomly.

Pair Corralation between Ford and NervGen Pharma

Taking into account the 90-day investment horizon Ford is expected to generate 7.19 times less return on investment than NervGen Pharma. But when comparing it to its historical volatility, Ford Motor is 2.52 times less risky than NervGen Pharma. It trades about 0.03 of its potential returns per unit of risk. NervGen Pharma Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  173.00  in NervGen Pharma Corp on August 25, 2024 and sell it today you would earn a total of  12.00  from holding NervGen Pharma Corp or generate 6.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Ford Motor  vs.  NervGen Pharma Corp

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) 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.

NervGen Pharma Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NervGen Pharma Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NervGen Pharma is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ford and NervGen Pharma

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

The idea behind Ford Motor and NervGen Pharma 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.