Correlation Between Ford and Big Lots

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

Diversification Opportunities for Ford and Big Lots

-0.21
  Correlation Coefficient

Very good diversification

The 20 months correlation between Ford and Big Lots is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Big Lots in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Lots 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 Big Lots. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Lots has no effect on the direction of Ford i.e., Ford and Big Lots go up and down completely randomly.

Pair Corralation between Ford and Big Lots

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.65 times more return on investment than Big Lots. However, Ford Motor is 1.55 times less risky than Big Lots. It trades about -0.17 of its potential returns per unit of risk. Big Lots is currently generating about -0.14 per unit of risk. If you would invest  1,680  in Ford Motor on March 31, 2022 and sell it today you would lose (499.00)  from holding Ford Motor or give up 29.7% of portfolio value over 90 days.
Time Period20 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Big Lots

 Performance (%) 
      Timeline 
Ford Motor 
Ford Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in July 2022.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0356
Payout Ratio
0.23
Last Split Factor
1748175:10
Forward Annual Dividend Rate
0.4
Dividend Date
2022-06-01
Ex Dividend Date
2022-04-25
Last Split Date
2000-08-03

Ford Price Channel

Big Lots 
Big Lots Performance
0 of 100
Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest sluggish performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0531
Payout Ratio
0.52
Last Split Factor
5:4
Forward Annual Dividend Rate
1.2
Dividend Date
2022-06-24
Ex Dividend Date
2022-06-09
Last Split Date
1997-06-25

Big Lots Price Channel

Ford and Big Lots Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Ford and Big Lots

The main advantage of trading using opposite Ford and Big Lots positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Big Lots 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 Big Lots will offset losses from the drop in Big Lots' long position.
The idea behind Ford Motor and Big Lots 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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