Correlation Between Ford and Lotus Technology
Can any of the company-specific risk be diversified away by investing in both Ford and Lotus Technology 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 Lotus Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Lotus Technology Warrants, you can compare the effects of market volatilities on Ford and Lotus Technology 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 Lotus Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Lotus Technology.
Diversification Opportunities for Ford and Lotus Technology
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Lotus is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Lotus Technology Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Technology Warrants 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 Lotus Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Technology Warrants has no effect on the direction of Ford i.e., Ford and Lotus Technology go up and down completely randomly.
Pair Corralation between Ford and Lotus Technology
Given the investment horizon of 90 days Ford is expected to generate 11.6 times less return on investment than Lotus Technology. But when comparing it to its historical volatility, Ford Motor is 7.8 times less risky than Lotus Technology. It trades about 0.05 of its potential returns per unit of risk. Lotus Technology Warrants is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 19.00 in Lotus Technology Warrants on November 9, 2024 and sell it today you would earn a total of 1.00 from holding Lotus Technology Warrants or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 75.0% |
| Values | Daily Returns |
Ford Motor vs. Lotus Technology Warrants
Performance |
| Timeline |
| Ford Motor |
| Lotus Technology Warrants |
Ford and Lotus Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Lotus Technology
The main advantage of trading using opposite Ford and Lotus Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Lotus Technology 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 Lotus Technology will offset losses from the drop in Lotus Technology's long position.The idea behind Ford Motor and Lotus Technology Warrants 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.| Lotus Technology vs. Ambipar Emergency Response | Lotus Technology vs. Weyco Group | Lotus Technology vs. MYT Netherlands Parent | Lotus Technology vs. Valneva SE ADR |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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