Correlation Between Alcoa Corp and Ford

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Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Ford 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 Alcoa Corp and Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Ford Motor, you can compare the effects of market volatilities on Alcoa Corp and Ford 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 Alcoa Corp with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Ford.

Diversification Opportunities for Alcoa Corp and Ford

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Alcoa and Ford is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Alcoa Corp 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 Alcoa Corp are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Ford go up and down completely randomly.

Pair Corralation between Alcoa Corp and Ford

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Ford. In addition to that, Alcoa Corp is 1.29 times more volatile than Ford Motor. It trades about -0.38 of its total potential returns per unit of risk. Ford Motor is currently generating about -0.4 per unit of volatility. If you would invest  1,516  in Ford Motor on July 4, 2022 and sell it today you would lose (396.00)  from holding Ford Motor or give up 26.12% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Alcoa Corp  vs.  Ford Motor

 Performance (%) 
       Timeline  
Alcoa Corp 
Alcoa Performance
0 of 100
Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Alcoa Price Channel

Ford Motor 
Ford Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Ford is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ford Price Channel

Alcoa Corp and Ford Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and Ford

The main advantage of trading using opposite Alcoa Corp and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.
Alcoa Corp vs. Amazon Inc
The idea behind Alcoa Corp and Ford Motor 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.
Ford vs. Amazon Inc
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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.

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