Correlation Between Ford and RTL Group
Can any of the company-specific risk be diversified away by investing in both Ford and RTL Group 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 RTL Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and RTL Group SA, you can compare the effects of market volatilities on Ford and RTL Group 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 RTL Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and RTL Group.
Diversification Opportunities for Ford and RTL Group
Very good diversification
The 3 months correlation between Ford and RTL is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of Ford i.e., Ford and RTL Group go up and down completely randomly.
Pair Corralation between Ford and RTL Group
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.65 times more return on investment than RTL Group. However, Ford Motor is 1.54 times less risky than RTL Group. It trades about 0.17 of its potential returns per unit of risk. RTL Group SA is currently generating about -0.28 per unit of risk. If you would invest 1,033 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 77.00 from holding Ford Motor or generate 7.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ford Motor vs. RTL Group SA
Performance |
| Timeline |
| Ford Motor |
| RTL Group SA |
Ford and RTL Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and RTL Group
The main advantage of trading using opposite Ford and RTL Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, RTL Group 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 RTL Group will offset losses from the drop in RTL Group's long position.The idea behind Ford Motor and RTL Group 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.| RTL Group vs. Gaztransport et Technigaz | RTL Group vs. Bisichi Mining PLC | RTL Group vs. EVS Broadcast Equipment | RTL Group vs. Molson Coors Beverage |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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