Correlation Between Ford and Leaf Mobile

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

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

Diversification Opportunities for Ford and Leaf Mobile

-0.08

Correlation Coefficient

Ford  Leaf Mobile

Good diversification

The 3 months correlation between Ford and Leaf is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Leaf Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leaf Mobile 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 Leaf Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leaf Mobile has no effect on the direction of Ford i.e., Ford and Leaf Mobile go up and down completely randomly.

Pair Corralation between Ford and Leaf Mobile

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Leaf Mobile. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 2.55 times less risky than Leaf Mobile. The stock trades about -0.23 of its potential returns per unit of risk. The Leaf Mobile is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Leaf Mobile on September 22, 2024 and sell it today you would lose (3.00) from holding Leaf Mobile or give up 7.14% of portfolio value over 90 days.

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

Ford Motor  vs.  Leaf Mobile

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Leaf Mobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leaf Mobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ford and Leaf Mobile

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

The idea behind Ford Motor and Leaf Mobile 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.