Correlation Between Ford and Oriental Precision
Can any of the company-specific risk be diversified away by investing in both Ford and Oriental Precision 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 Oriental Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Oriental Precision Engineering, you can compare the effects of market volatilities on Ford and Oriental Precision 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 Oriental Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Oriental Precision.
Diversification Opportunities for Ford and Oriental Precision
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Oriental is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Oriental Precision Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Precision 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 Oriental Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Precision has no effect on the direction of Ford i.e., Ford and Oriental Precision go up and down completely randomly.
Pair Corralation between Ford and Oriental Precision
Taking into account the 90-day investment horizon Ford is expected to generate 8.43 times less return on investment than Oriental Precision. But when comparing it to its historical volatility, Ford Motor is 1.28 times less risky than Oriental Precision. It trades about 0.01 of its potential returns per unit of risk. Oriental Precision Engineering is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 221,979 in Oriental Precision Engineering on September 24, 2024 and sell it today you would earn a total of 304,021 from holding Oriental Precision Engineering or generate 136.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.38% |
| Values | Daily Returns |
Ford Motor vs. Oriental Precision Engineering
Performance |
| Timeline |
| Ford Motor |
| Oriental Precision |
Ford and Oriental Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Oriental Precision
The main advantage of trading using opposite Ford and Oriental Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Oriental Precision 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 Oriental Precision will offset losses from the drop in Oriental Precision's long position.The idea behind Ford Motor and Oriental Precision Engineering 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.| Oriental Precision vs. KakaoBank Corp | Oriental Precision vs. NICE Information Service | Oriental Precision vs. Korea Information Engineering | Oriental Precision vs. Lotte Data Communication |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |