Correlation Between Ford and Leisure Fund
Can any of the company-specific risk be diversified away by investing in both Ford and Leisure Fund 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 Leisure Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Leisure Fund Class, you can compare the effects of market volatilities on Ford and Leisure Fund 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 Leisure Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Leisure Fund.
Diversification Opportunities for Ford and Leisure Fund
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and Leisure is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Leisure Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leisure Fund Class 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 Leisure Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leisure Fund Class has no effect on the direction of Ford i.e., Ford and Leisure Fund go up and down completely randomly.
Pair Corralation between Ford and Leisure Fund
Given the investment horizon of 90 days Ford Motor is expected to under-perform the Leisure Fund. But the preferred stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.2 times less risky than Leisure Fund. The preferred stock trades about -0.1 of its potential returns per unit of risk. The Leisure Fund Class is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 7,488 in Leisure Fund Class on September 12, 2024 and sell it today you would earn a total of 1,246 from holding Leisure Fund Class or generate 16.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Leisure Fund Class
Performance |
| Timeline |
| Ford Motor |
| Leisure Fund Class |
Ford and Leisure Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Leisure Fund
The main advantage of trading using opposite Ford and Leisure Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Leisure Fund 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 Leisure Fund will offset losses from the drop in Leisure Fund's long position.The idea behind Ford Motor and Leisure Fund Class 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.| Leisure Fund vs. Calvert Global Energy | Leisure Fund vs. Energy Basic Materials | Leisure Fund vs. Alpsalerian Energy Infrastructure | Leisure Fund vs. Fidelity Advisor Energy |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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