Correlation Between Ford and AeroSpace Technology
Can any of the company-specific risk be diversified away by investing in both Ford and AeroSpace 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 AeroSpace 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 AeroSpace Technology of, you can compare the effects of market volatilities on Ford and AeroSpace 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 AeroSpace Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and AeroSpace Technology.
Diversification Opportunities for Ford and AeroSpace Technology
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and AeroSpace is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AeroSpace Technology of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroSpace 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 AeroSpace Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroSpace Technology has no effect on the direction of Ford i.e., Ford and AeroSpace Technology go up and down completely randomly.
Pair Corralation between Ford and AeroSpace Technology
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.16 times more return on investment than AeroSpace Technology. However, Ford is 1.16 times more volatile than AeroSpace Technology of. It trades about 0.18 of its potential returns per unit of risk. AeroSpace Technology of is currently generating about -0.14 per unit of risk. If you would invest 1,022 in Ford Motor on September 4, 2024 and sell it today you would earn a total of 76.00 from holding Ford Motor or generate 7.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. AeroSpace Technology of
Performance |
| Timeline |
| Ford Motor |
| AeroSpace Technology |
Ford and AeroSpace Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and AeroSpace Technology
The main advantage of trading using opposite Ford and AeroSpace Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, AeroSpace 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 AeroSpace Technology will offset losses from the drop in AeroSpace Technology's long position.The idea behind Ford Motor and AeroSpace Technology of 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.| AeroSpace Technology vs. LG Display | AeroSpace Technology vs. Hyundai Motor | AeroSpace Technology vs. Hyundai Motor Co | AeroSpace Technology vs. Hyundai Motor 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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