Correlation Between Ford and Bohae Brewery
Can any of the company-specific risk be diversified away by investing in both Ford and Bohae Brewery 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 Bohae Brewery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Bohae Brewery, you can compare the effects of market volatilities on Ford and Bohae Brewery 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 Bohae Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Bohae Brewery.
Diversification Opportunities for Ford and Bohae Brewery
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Bohae is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Bohae Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bohae Brewery 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 Bohae Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bohae Brewery has no effect on the direction of Ford i.e., Ford and Bohae Brewery go up and down completely randomly.
Pair Corralation between Ford and Bohae Brewery
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.94 times more return on investment than Bohae Brewery. However, Ford Motor is 1.07 times less risky than Bohae Brewery. It trades about -0.01 of its potential returns per unit of risk. Bohae Brewery is currently generating about -0.02 per unit of risk. If you would invest 1,397 in Ford Motor on August 28, 2024 and sell it today you would lose (257.00) from holding Ford Motor or give up 18.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.33% |
| Values | Daily Returns |
Ford Motor vs. Bohae Brewery
Performance |
| Timeline |
| Ford Motor |
| Bohae Brewery |
Ford and Bohae Brewery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Bohae Brewery
The main advantage of trading using opposite Ford and Bohae Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Bohae Brewery 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 Bohae Brewery will offset losses from the drop in Bohae Brewery's long position.The idea behind Ford Motor and Bohae Brewery 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.| Bohae Brewery vs. Sam Yang Foods | Bohae Brewery vs. ZUM Internet Corp | Bohae Brewery vs. Inzi Display CoLtd | Bohae Brewery vs. CG Hi Tech |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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