Correlation Between Ford and Solstad Offshore
Can any of the company-specific risk be diversified away by investing in both Ford and Solstad Offshore 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 Solstad Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Solstad Offshore ASA, you can compare the effects of market volatilities on Ford and Solstad Offshore 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 Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Solstad Offshore.
Diversification Opportunities for Ford and Solstad Offshore
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Solstad is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Ford i.e., Ford and Solstad Offshore go up and down completely randomly.
Pair Corralation between Ford and Solstad Offshore
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.86 times more return on investment than Solstad Offshore. However, Ford Motor is 1.16 times less risky than Solstad Offshore. It trades about 0.13 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.04 per unit of risk. If you would invest 965.00 in Ford Motor on November 3, 2024 and sell it today you would earn a total of 43.00 from holding Ford Motor or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Ford Motor vs. Solstad Offshore ASA
Performance |
| Timeline |
| Ford Motor |
| Solstad Offshore ASA |
Ford and Solstad Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Solstad Offshore
The main advantage of trading using opposite Ford and Solstad Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Solstad Offshore 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 Solstad Offshore will offset losses from the drop in Solstad Offshore's long position.The idea behind Ford Motor and Solstad Offshore ASA 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.| Solstad Offshore vs. Zegona Communications Plc | Solstad Offshore vs. Universal Display Corp | Solstad Offshore vs. Summit Materials Cl | Solstad Offshore vs. Darden Restaurants |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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