Correlation Between Ford and Carlyle Secured

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

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

Diversification Opportunities for Ford and Carlyle Secured

0.81

Correlation Coefficient

Ford  Carlyle Secured

Very poor diversification

The 3 months correlation between Ford and Carlyle is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Carlyle Secured Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlyle Secured Lending 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 Carlyle Secured. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlyle Secured Lending has no effect on the direction of Ford i.e., Ford and Carlyle Secured go up and down completely randomly.

Pair Corralation between Ford and Carlyle Secured

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Carlyle Secured. In addition to that, Ford is 2.42 times more volatile than Carlyle Secured Lending. It trades about -0.08 of its total potential returns per unit of risk. Carlyle Secured Lending is currently generating about -0.05 per unit of volatility. If you would invest  1,772  in Carlyle Secured Lending on July 3, 2024 and sell it today you would lose (75.00) from holding Carlyle Secured Lending or give up 4.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Ford Motor  vs.  Carlyle Secured Lending

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in November 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Carlyle Secured Lending

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlyle Secured Lending has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Carlyle Secured 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 Carlyle Secured

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

The idea behind Ford Motor and Carlyle Secured Lending 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.