Correlation Between Ford and Lotte Rental
Can any of the company-specific risk be diversified away by investing in both Ford and Lotte Rental 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 Lotte Rental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Lotte Rental Co, you can compare the effects of market volatilities on Ford and Lotte Rental 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 Lotte Rental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Lotte Rental.
Diversification Opportunities for Ford and Lotte Rental
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Lotte is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Lotte Rental Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Rental 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 Lotte Rental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Rental has no effect on the direction of Ford i.e., Ford and Lotte Rental go up and down completely randomly.
Pair Corralation between Ford and Lotte Rental
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Lotte Rental. In addition to that, Ford is 1.12 times more volatile than Lotte Rental Co. It trades about -0.25 of its total potential returns per unit of risk. Lotte Rental Co is currently generating about -0.22 per unit of volatility. If you would invest 3,175,000 in Lotte Rental Co on October 12, 2024 and sell it today you would lose (190,000) from holding Lotte Rental Co or give up 5.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Lotte Rental Co
Performance |
| Timeline |
| Ford Motor |
| Lotte Rental |
Ford and Lotte Rental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Lotte Rental
The main advantage of trading using opposite Ford and Lotte Rental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Lotte Rental 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 Lotte Rental will offset losses from the drop in Lotte Rental's long position.| Ford vs. Canoo Inc | Ford vs. Aquagold International | Ford vs. Morningstar Unconstrained Allocation | Ford vs. Thrivent High Yield |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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