Correlation Between Ford and Select Sector
Can any of the company-specific risk be diversified away by investing in both Ford and Select Sector 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 Select Sector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and The Select Sector, you can compare the effects of market volatilities on Ford and Select Sector 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 Select Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Select Sector.
Diversification Opportunities for Ford and Select Sector
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Select is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and The Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Sector 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 Select Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Sector has no effect on the direction of Ford i.e., Ford and Select Sector go up and down completely randomly.
Pair Corralation between Ford and Select Sector
Given the investment horizon of 90 days Ford is expected to generate 6.01 times less return on investment than Select Sector. In addition to that, Ford is 1.1 times more volatile than The Select Sector. It trades about 0.01 of its total potential returns per unit of risk. The Select Sector is currently generating about 0.06 per unit of volatility. If you would invest 108,648 in The Select Sector on September 12, 2024 and sell it today you would earn a total of 49,052 from holding The Select Sector or generate 45.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. The Select Sector
Performance |
| Timeline |
| Ford Motor |
| Select Sector |
Ford and Select Sector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Select Sector
The main advantage of trading using opposite Ford and Select Sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Select Sector 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 Select Sector will offset losses from the drop in Select Sector's long position.| Ford vs. McEwen Mining | Ford vs. GMxico Transportes SAB | Ford vs. Delta Air Lines | Ford vs. Ameriprise Financial |
| Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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