Correlation Between Ford and Uber Technologies

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

Diversification Opportunities for Ford and Uber Technologies

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Ford and Uber Technologies is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of Ford i.e., Ford and Uber Technologies go up and down completely randomly.

Pair Corralation between Ford and Uber Technologies

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.82 times more return on investment than Uber Technologies. However, Ford Motor is 1.22 times less risky than Uber Technologies. It trades about 0.05 of its potential returns per unit of risk. Uber Technologies is currently generating about -0.01 per unit of risk. If you would invest  675.00  in Ford Motor on April 7, 2022 and sell it today you would earn a total of  445.00  from holding Ford Motor or generate 65.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Uber Technologies

 Performance (%) 
      Timeline 
Ford Motor 
Ford Performance
0 of 100
Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in August 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0353
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

Uber Technologies 
Uber Technologies Performance
0 of 100
Over the last 90 days Uber Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in August 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Uber Technologies Price Channel

Ford and Uber Technologies Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Ford and Uber Technologies

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

Uber Technologies

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Uber Technologies as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Uber Technologies' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Uber Technologies' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Uber Technologies.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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