Correlation Between Ford and Homecast CoLtd
Can any of the company-specific risk be diversified away by investing in both Ford and Homecast CoLtd 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 Homecast CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Homecast CoLtd, you can compare the effects of market volatilities on Ford and Homecast CoLtd 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 Homecast CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Homecast CoLtd.
Diversification Opportunities for Ford and Homecast CoLtd
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Homecast is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Homecast CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homecast CoLtd 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 Homecast CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homecast CoLtd has no effect on the direction of Ford i.e., Ford and Homecast CoLtd go up and down completely randomly.
Pair Corralation between Ford and Homecast CoLtd
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.5 times more return on investment than Homecast CoLtd. However, Ford Motor is 2.0 times less risky than Homecast CoLtd. It trades about -0.01 of its potential returns per unit of risk. Homecast CoLtd is currently generating about -0.02 per unit of risk. If you would invest 1,397 in Ford Motor on August 28, 2024 and sell it today you would lose (257.00) from holding Ford Motor or give up 18.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.33% |
| Values | Daily Returns |
Ford Motor vs. Homecast CoLtd
Performance |
| Timeline |
| Ford Motor |
| Homecast CoLtd |
Ford and Homecast CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Homecast CoLtd
The main advantage of trading using opposite Ford and Homecast CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Homecast CoLtd 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 Homecast CoLtd will offset losses from the drop in Homecast CoLtd's long position.The idea behind Ford Motor and Homecast CoLtd 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.| Homecast CoLtd vs. Ssangyong Materials Corp | Homecast CoLtd vs. MetaLabs Co | Homecast CoLtd vs. Iljin Materials Co | Homecast CoLtd vs. Kbi Metal 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |