Correlation Between Ford and Leaders Technology
Can any of the company-specific risk be diversified away by investing in both Ford and Leaders Technology 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 Leaders Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Leaders Technology Investment, you can compare the effects of market volatilities on Ford and Leaders 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 Leaders Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Leaders Technology.
Diversification Opportunities for Ford and Leaders Technology
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Leaders is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Leaders Technology Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leaders 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 Leaders Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leaders Technology has no effect on the direction of Ford i.e., Ford and Leaders Technology go up and down completely randomly.
Pair Corralation between Ford and Leaders Technology
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.48 times more return on investment than Leaders Technology. However, Ford Motor is 2.07 times less risky than Leaders Technology. It trades about 0.04 of its potential returns per unit of risk. Leaders Technology Investment is currently generating about -0.1 per unit of risk. If you would invest 1,003 in Ford Motor on October 28, 2024 and sell it today you would earn a total of 9.00 from holding Ford Motor or generate 0.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Ford Motor vs. Leaders Technology Investment
Performance |
| Timeline |
| Ford Motor |
| Leaders Technology |
Ford and Leaders Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Leaders Technology
The main advantage of trading using opposite Ford and Leaders Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Leaders 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 Leaders Technology will offset losses from the drop in Leaders Technology's long position.The idea behind Ford Motor and Leaders Technology Investment 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.| Leaders Technology vs. Samsung Electronics Co | Leaders Technology vs. Samsung Electronics Co | Leaders Technology vs. SK Hynix | Leaders Technology vs. HMM Co |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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