Correlation Between Ford and J Steel
Can any of the company-specific risk be diversified away by investing in both Ford and J Steel 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 J Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and J Steel Co, you can compare the effects of market volatilities on Ford and J Steel 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 J Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and J Steel.
Diversification Opportunities for Ford and J Steel
Weak diversification
The 3 months correlation between Ford and 023440 is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and J Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Steel 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 J Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Steel has no effect on the direction of Ford i.e., Ford and J Steel go up and down completely randomly.
Pair Corralation between Ford and J Steel
Taking into account the 90-day investment horizon Ford is expected to generate 7.49 times less return on investment than J Steel. But when comparing it to its historical volatility, Ford Motor is 2.29 times less risky than J Steel. It trades about 0.06 of its potential returns per unit of risk. J Steel Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 137,000 in J Steel Co on August 28, 2024 and sell it today you would earn a total of 50,800 from holding J Steel Co or generate 37.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 93.02% |
| Values | Daily Returns |
Ford Motor vs. J Steel Co
Performance |
| Timeline |
| Ford Motor |
| J Steel |
Ford and J Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and J Steel
The main advantage of trading using opposite Ford and J Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, J Steel 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 J Steel will offset losses from the drop in J Steel's long position.The idea behind Ford Motor and J Steel Co 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.| J Steel vs. Shinsegae Information Communication | J Steel vs. Ssangyong Information Communication | J Steel vs. LG Display Co | J Steel vs. ZUM Internet Corp |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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