Correlation Between Blue Bird and Ford

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

Diversification Opportunities for Blue Bird and Ford

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Blue Bird and Ford is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Blue Bird Corp and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Blue Bird 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 Blue Bird 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 Blue Bird i.e., Blue Bird and Ford go up and down completely randomly.

Pair Corralation between Blue Bird and Ford

Given the investment horizon of 90 days Blue Bird is expected to generate 2.99 times less return on investment than Ford. In addition to that, Blue Bird is 1.32 times more volatile than Ford Motor. It trades about 0.02 of its total potential returns per unit of risk. Ford Motor is currently generating about 0.08 per unit of volatility. If you would invest  664.00  in Ford Motor on May 21, 2022 and sell it today you would earn a total of  921.00  from holding Ford Motor or generate 138.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Blue Bird Corp  vs.  Ford Motor

 Performance (%) 
       Timeline  
Blue Bird Corp 
Blue Bird Performance
0 of 100
Over the last 90 days Blue Bird Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Blue Bird is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Blue Bird Price Channel

Ford Motor 
Ford Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Ford exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ford Price Channel

Blue Bird and Ford Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Blue Bird and Ford

The main advantage of trading using opposite Blue Bird and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Bird 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.
The idea behind Blue Bird 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.
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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