Correlation Between Ford and AerCap

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

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

Diversification Opportunities for Ford and AerCap

0.23

Correlation Coefficient

Ford  AerCap

Modest diversification

The 3 months correlation between Ford and AerCap is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AerCap Global Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Global Aviation 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 AerCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Global Aviation has no effect on the direction of Ford i.e., Ford and AerCap go up and down completely randomly.

Pair Corralation between Ford and AerCap

Taking into account the 90-day investment horizon Ford Motor is expected to generate 3.8 times more return on investment than AerCap. However, Ford is 3.8 times more volatile than AerCap Global Aviation. It trades about 0.01 of its potential returns per unit of risk. AerCap Global Aviation is currently generating about -0.15 per unit of risk. If you would invest  940.00  in Ford Motor on January 11, 2025 and sell it today you would lose (7.00) from holding Ford Motor or give up 0.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	68.25%
Values	Daily Returns

Ford Motor  vs.  AerCap Global Aviation

Ford Motor

Risk-Adjusted Performance

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

AerCap Global Aviation

Risk-Adjusted Performance

Very Weak

Over the last 90 days AerCap Global Aviation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for AerCap Global Aviation investors.

Pair Trading with Ford and AerCap

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

The idea behind Ford Motor and AerCap Global Aviation 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.