Correlation Between Ford and Aju IB
Can any of the company-specific risk be diversified away by investing in both Ford and Aju IB 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 Aju IB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Aju IB Investment, you can compare the effects of market volatilities on Ford and Aju IB 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 Aju IB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Aju IB.
Diversification Opportunities for Ford and Aju IB
Good diversification
The 3 months correlation between Ford and Aju is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aju IB Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aju IB Investment 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 Aju IB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aju IB Investment has no effect on the direction of Ford i.e., Ford and Aju IB go up and down completely randomly.
Pair Corralation between Ford and Aju IB
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Aju IB. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.89 times less risky than Aju IB. The stock trades about -0.02 of its potential returns per unit of risk. The Aju IB Investment is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 250,890 in Aju IB Investment on November 3, 2024 and sell it today you would lose (14,890) from holding Aju IB Investment or give up 5.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.16% |
| Values | Daily Returns |
Ford Motor vs. Aju IB Investment
Performance |
| Timeline |
| Ford Motor |
| Aju IB Investment |
Ford and Aju IB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Aju IB
The main advantage of trading using opposite Ford and Aju IB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Aju IB 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 Aju IB will offset losses from the drop in Aju IB's long position.The idea behind Ford Motor and Aju IB 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.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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