Correlation Between Ford and Blue Bird

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

Diversification Opportunities for Ford and Blue Bird

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Ford and Blue Bird is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Blue Bird Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Bird Corp 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 Blue Bird. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Bird Corp has no effect on the direction of Ford i.e., Ford and Blue Bird go up and down completely randomly.

Pair Corralation between Ford and Blue Bird

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.81 times more return on investment than Blue Bird. However, Ford Motor is 1.24 times less risky than Blue Bird. It trades about 0.5 of its potential returns per unit of risk. Blue Bird Corp is currently generating about 0.39 per unit of risk. If you would invest  1,129  in Ford Motor on May 12, 2022 and sell it today you would earn a total of  416.00  from holding Ford Motor or generate 36.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Blue Bird Corp

 Performance (%) 
       Timeline  
Ford Motor 
Ford Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady 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 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 latest unsteady performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Blue Bird Price Channel

Ford and Blue Bird Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Blue Bird

The main advantage of trading using opposite Ford and Blue Bird positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Blue Bird 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 Blue Bird will offset losses from the drop in Blue Bird's long position.
The idea behind Ford Motor and Blue Bird Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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