Correlation Between Ford and Inmobiliaria Colonial

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

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

Diversification Opportunities for Ford and Inmobiliaria Colonial

-0.03

Correlation Coefficient

Ford  Inmobiliaria Colonial

Good diversification

The 3 months correlation between Ford and Inmobiliaria is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Inmobiliaria Colonial SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inmobiliaria Colonial 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 Inmobiliaria Colonial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inmobiliaria Colonial has no effect on the direction of Ford i.e., Ford and Inmobiliaria Colonial go up and down completely randomly.

Pair Corralation between Ford and Inmobiliaria Colonial

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Inmobiliaria Colonial. In addition to that, Ford is 1.54 times more volatile than Inmobiliaria Colonial SA. It trades about -0.15 of its total potential returns per unit of risk. Inmobiliaria Colonial SA is currently generating about 0.19 per unit of volatility. If you would invest  528.00  in Inmobiliaria Colonial SA on February 2, 2024 and sell it today you would earn a total of  34.00  from holding Inmobiliaria Colonial SA or generate 6.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Inmobiliaria Colonial SA

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.

Inmobiliaria Colonial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Inmobiliaria Colonial SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Inmobiliaria Colonial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and Inmobiliaria Colonial

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

The idea behind Ford Motor and Inmobiliaria Colonial SA 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.