Correlation Between Ford and Advanced Technology
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By analyzing existing cross correlation between Ford Motor and Advanced Technology Materials, you can compare the effects of market volatilities on Ford and Advanced 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 Advanced Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Advanced Technology.
Diversification Opportunities for Ford and Advanced Technology
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Advanced is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Advanced Technology Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Technology 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 Advanced Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Technology has no effect on the direction of Ford i.e., Ford and Advanced Technology go up and down completely randomly.
Pair Corralation between Ford and Advanced Technology
Taking into account the 90-day investment horizon Ford is expected to generate 1.37 times less return on investment than Advanced Technology. But when comparing it to its historical volatility, Ford Motor is 2.18 times less risky than Advanced Technology. It trades about 0.23 of its potential returns per unit of risk. Advanced Technology Materials is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,085 in Advanced Technology Materials on September 1, 2024 and sell it today you would earn a total of 136.00 from holding Advanced Technology Materials or generate 12.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Advanced Technology Materials
Performance |
| Timeline |
| Ford Motor |
| Advanced Technology |
Ford and Advanced Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Advanced Technology
The main advantage of trading using opposite Ford and Advanced Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Advanced 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 Advanced Technology will offset losses from the drop in Advanced Technology's long position.The idea behind Ford Motor and Advanced Technology Materials 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.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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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