Correlation Between Ford and Alton Sports
Can any of the company-specific risk be diversified away by investing in both Ford and Alton Sports 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 Alton Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Alton Sports CoLtd, you can compare the effects of market volatilities on Ford and Alton Sports 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 Alton Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Alton Sports.
Diversification Opportunities for Ford and Alton Sports
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Alton is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Alton Sports CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alton Sports 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 Alton Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alton Sports CoLtd has no effect on the direction of Ford i.e., Ford and Alton Sports go up and down completely randomly.
Pair Corralation between Ford and Alton Sports
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.95 times more return on investment than Alton Sports. However, Ford Motor is 1.05 times less risky than Alton Sports. It trades about -0.01 of its potential returns per unit of risk. Alton Sports CoLtd is currently generating about -0.05 per unit of risk. If you would invest 1,027 in Ford Motor on October 29, 2024 and sell it today you would lose (15.00) from holding Ford Motor or give up 1.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.39% |
| Values | Daily Returns |
Ford Motor vs. Alton Sports CoLtd
Performance |
| Timeline |
| Ford Motor |
| Alton Sports CoLtd |
Ford and Alton Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Alton Sports
The main advantage of trading using opposite Ford and Alton Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Alton Sports 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 Alton Sports will offset losses from the drop in Alton Sports' long position.The idea behind Ford Motor and Alton Sports 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.| Alton Sports vs. Samsung Electronics Co | Alton Sports vs. Samsung Electronics Co | Alton Sports vs. KB Financial Group | Alton Sports vs. Shinhan Financial Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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