Correlation Between Ford and Wave Electronics
Can any of the company-specific risk be diversified away by investing in both Ford and Wave Electronics 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 Wave Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Wave Electronics Co, you can compare the effects of market volatilities on Ford and Wave Electronics 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 Wave Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Wave Electronics.
Diversification Opportunities for Ford and Wave Electronics
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Wave is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Wave Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wave Electronics 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 Wave Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wave Electronics has no effect on the direction of Ford i.e., Ford and Wave Electronics go up and down completely randomly.
Pair Corralation between Ford and Wave Electronics
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.6 times more return on investment than Wave Electronics. However, Ford Motor is 1.68 times less risky than Wave Electronics. It trades about 0.18 of its potential returns per unit of risk. Wave Electronics Co is currently generating about -0.21 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 | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Wave Electronics Co
Performance |
| Timeline |
| Ford Motor |
| Wave Electronics |
Ford and Wave Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Wave Electronics
The main advantage of trading using opposite Ford and Wave Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Wave Electronics 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 Wave Electronics will offset losses from the drop in Wave Electronics' long position.The idea behind Ford Motor and Wave Electronics Co 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.| Wave Electronics vs. Dongsin Engineering Construction | Wave Electronics vs. Doosan Fuel Cell | Wave Electronics vs. Daishin Balance 1 | Wave Electronics vs. Total Soft Bank |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |