Correlation Between Ford and KPX Green
Can any of the company-specific risk be diversified away by investing in both Ford and KPX Green 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 KPX Green into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and KPX Green Chemical, you can compare the effects of market volatilities on Ford and KPX Green 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 KPX Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and KPX Green.
Diversification Opportunities for Ford and KPX Green
Excellent diversification
The 3 months correlation between Ford and KPX is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and KPX Green Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KPX Green Chemical 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 KPX Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KPX Green Chemical has no effect on the direction of Ford i.e., Ford and KPX Green go up and down completely randomly.
Pair Corralation between Ford and KPX Green
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the KPX Green. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 3.75 times less risky than KPX Green. The stock trades about -0.25 of its potential returns per unit of risk. The KPX Green Chemical is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 478,442 in KPX Green Chemical on October 14, 2024 and sell it today you would earn a total of 219,558 from holding KPX Green Chemical or generate 45.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. KPX Green Chemical
Performance |
| Timeline |
| Ford Motor |
| KPX Green Chemical |
Ford and KPX Green Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and KPX Green
The main advantage of trading using opposite Ford and KPX Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, KPX Green 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 KPX Green will offset losses from the drop in KPX Green's long position.The idea behind Ford Motor and KPX Green Chemical 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.| KPX Green vs. CKH Food Health | KPX Green vs. Keyang Electric Machinery | KPX Green vs. Nam Hwa Construction | KPX Green vs. Hanshin Construction 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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