Correlation Between Ford and ECD Automotive
Can any of the company-specific risk be diversified away by investing in both Ford and ECD Automotive 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 ECD Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and ECD Automotive Design, you can compare the effects of market volatilities on Ford and ECD Automotive 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 ECD Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and ECD Automotive.
Diversification Opportunities for Ford and ECD Automotive
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and ECD is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ECD Automotive Design in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECD Automotive Design 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 ECD Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECD Automotive Design has no effect on the direction of Ford i.e., Ford and ECD Automotive go up and down completely randomly.
Pair Corralation between Ford and ECD Automotive
Given the investment horizon of 90 days Ford Motor is expected to generate 0.18 times more return on investment than ECD Automotive. However, Ford Motor is 5.53 times less risky than ECD Automotive. It trades about 0.03 of its potential returns per unit of risk. ECD Automotive Design is currently generating about -0.05 per unit of risk. If you would invest 2,072 in Ford Motor on September 3, 2024 and sell it today you would earn a total of 311.00 from holding Ford Motor or generate 15.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. ECD Automotive Design
Performance |
| Timeline |
| Ford Motor |
| ECD Automotive Design |
Ford and ECD Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and ECD Automotive
The main advantage of trading using opposite Ford and ECD Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, ECD Automotive 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 ECD Automotive will offset losses from the drop in ECD Automotive's long position.The idea behind Ford Motor and ECD Automotive Design 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.| ECD Automotive vs. GreenPower Motor | ECD Automotive vs. ZEEKR Intelligent Technology | ECD Automotive vs. Volcon Inc | ECD Automotive vs. Ford Motor |
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 the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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