Correlation Between Ford and Cathay Nasdaq
Can any of the company-specific risk be diversified away by investing in both Ford and Cathay Nasdaq 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 Cathay Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Cathay Nasdaq AI, you can compare the effects of market volatilities on Ford and Cathay Nasdaq 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 Cathay Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Cathay Nasdaq.
Diversification Opportunities for Ford and Cathay Nasdaq
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Cathay is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cathay Nasdaq AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Nasdaq AI 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 Cathay Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Nasdaq AI has no effect on the direction of Ford i.e., Ford and Cathay Nasdaq go up and down completely randomly.
Pair Corralation between Ford and Cathay Nasdaq
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.38 times more return on investment than Cathay Nasdaq. However, Ford is 1.38 times more volatile than Cathay Nasdaq AI. It trades about 0.17 of its potential returns per unit of risk. Cathay Nasdaq AI is currently generating about 0.21 per unit of risk. If you would invest 1,033 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 77.00 from holding Ford Motor or generate 7.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Cathay Nasdaq AI
Performance |
| Timeline |
| Ford Motor |
| Cathay Nasdaq AI |
Ford and Cathay Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Cathay Nasdaq
The main advantage of trading using opposite Ford and Cathay Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Cathay Nasdaq 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 Cathay Nasdaq will offset losses from the drop in Cathay Nasdaq's long position.The idea behind Ford Motor and Cathay Nasdaq AI 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.| Cathay Nasdaq vs. Yuanta Daily Taiwan | Cathay Nasdaq vs. Cathay Taiwan 5G | Cathay Nasdaq vs. Yuanta Daily CSI | Cathay Nasdaq vs. Fubon FTSE Vietnam |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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