Correlation Between Ford and Dassault Aviation
Can any of the company-specific risk be diversified away by investing in both Ford and Dassault Aviation 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 Dassault Aviation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Dassault Aviation SA, you can compare the effects of market volatilities on Ford and Dassault Aviation 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 Dassault Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Dassault Aviation.
Diversification Opportunities for Ford and Dassault Aviation
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Dassault is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dassault Aviation SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Aviation 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 Dassault Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Aviation has no effect on the direction of Ford i.e., Ford and Dassault Aviation go up and down completely randomly.
Pair Corralation between Ford and Dassault Aviation
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.2 times more return on investment than Dassault Aviation. However, Ford is 1.2 times more volatile than Dassault Aviation SA. It trades about 0.23 of its potential returns per unit of risk. Dassault Aviation SA is currently generating about 0.05 per unit of risk. If you would invest 1,015 in Ford Motor on September 1, 2024 and sell it today you would earn a total of 98.00 from holding Ford Motor or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Ford Motor vs. Dassault Aviation SA
Performance |
| Timeline |
| Ford Motor |
| Dassault Aviation |
Ford and Dassault Aviation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Dassault Aviation
The main advantage of trading using opposite Ford and Dassault Aviation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Dassault Aviation 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 Dassault Aviation will offset losses from the drop in Dassault Aviation's long position.The idea behind Ford Motor and Dassault Aviation SA 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.| Dassault Aviation vs. Uniper SE | Dassault Aviation vs. Mulberry Group PLC | Dassault Aviation vs. London Security Plc | Dassault Aviation vs. Triad Group PLC |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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