Correlation Between Ford and Finetechnix CoLtd
Can any of the company-specific risk be diversified away by investing in both Ford and Finetechnix CoLtd 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 Finetechnix CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Finetechnix CoLtd, you can compare the effects of market volatilities on Ford and Finetechnix CoLtd 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 Finetechnix CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Finetechnix CoLtd.
Diversification Opportunities for Ford and Finetechnix CoLtd
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and Finetechnix is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Finetechnix CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finetechnix CoLtd 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 Finetechnix CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finetechnix CoLtd has no effect on the direction of Ford i.e., Ford and Finetechnix CoLtd go up and down completely randomly.
Pair Corralation between Ford and Finetechnix CoLtd
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.15 times more return on investment than Finetechnix CoLtd. However, Ford is 1.15 times more volatile than Finetechnix CoLtd. It trades about 0.18 of its potential returns per unit of risk. Finetechnix CoLtd is currently generating about -0.37 per unit of risk. If you would invest 1,027 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 83.00 from holding Ford Motor or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Finetechnix CoLtd
Performance |
| Timeline |
| Ford Motor |
| Finetechnix CoLtd |
Ford and Finetechnix CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Finetechnix CoLtd
The main advantage of trading using opposite Ford and Finetechnix CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Finetechnix CoLtd 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 Finetechnix CoLtd will offset losses from the drop in Finetechnix CoLtd's long position.The idea behind Ford Motor and Finetechnix CoLtd 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.| Finetechnix CoLtd vs. Nice Information Telecommunication | Finetechnix CoLtd vs. Seah Steel Corp | Finetechnix CoLtd vs. Samhyun Steel Co | Finetechnix CoLtd vs. Sangsin Energy Display |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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