Correlation Between Ford and Asia Polymer
Can any of the company-specific risk be diversified away by investing in both Ford and Asia Polymer 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 Asia Polymer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Asia Polymer Corp, you can compare the effects of market volatilities on Ford and Asia Polymer 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 Asia Polymer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Asia Polymer.
Diversification Opportunities for Ford and Asia Polymer
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Asia is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Asia Polymer Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Polymer Corp 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 Asia Polymer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Polymer Corp has no effect on the direction of Ford i.e., Ford and Asia Polymer go up and down completely randomly.
Pair Corralation between Ford and Asia Polymer
Taking into account the 90-day investment horizon Ford is expected to generate 3.02 times less return on investment than Asia Polymer. But when comparing it to its historical volatility, Ford Motor is 1.21 times less risky than Asia Polymer. It trades about 0.03 of its potential returns per unit of risk. Asia Polymer Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,645 in Asia Polymer Corp on August 25, 2024 and sell it today you would earn a total of 65.00 from holding Asia Polymer Corp or generate 3.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ford Motor vs. Asia Polymer Corp
Performance |
| Timeline |
| Ford Motor |
| Asia Polymer Corp |
Ford and Asia Polymer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Asia Polymer
The main advantage of trading using opposite Ford and Asia Polymer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Asia Polymer 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 Asia Polymer will offset losses from the drop in Asia Polymer's long position.The idea behind Ford Motor and Asia Polymer Corp 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.| Asia Polymer vs. USI Corp | Asia Polymer vs. Taiwan Styrene Monomer | Asia Polymer vs. UPC Technology Corp | Asia Polymer vs. Grand Pacific Petrochemical |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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