Correlation Between Microsoft Corp and Ford

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

Diversification Opportunities for Microsoft Corp and Ford

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Microsoft and Ford is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Microsoft 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 Microsoft 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 Microsoft Corp i.e., Microsoft Corp and Ford go up and down completely randomly.

Pair Corralation between Microsoft Corp and Ford

Given the investment horizon of 90 days Microsoft Corp is expected to generate 0.72 times more return on investment than Ford. However, Microsoft Corp is 1.39 times less risky than Ford. It trades about -0.05 of its potential returns per unit of risk. Ford Motor is currently generating about -0.19 per unit of risk. If you would invest  31,266  in Microsoft Corp on April 7, 2022 and sell it today you would lose (4,981)  from holding Microsoft Corp or give up 15.93% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.19%
ValuesDaily Returns

Microsoft Corp  vs.  Ford Motor

 Performance (%) 
      Timeline 
Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0096
Payout Ratio
0.26
Last Split Factor
2:1
Forward Annual Dividend Rate
2.48
Dividend Date
2022-09-08
Ex Dividend Date
2022-08-17
Last Split Date
2003-02-18

Microsoft Price Channel

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

Microsoft Corp and Ford Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Microsoft Corp and Ford

The main advantage of trading using opposite Microsoft Corp and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.
The idea behind Microsoft 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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