Correlation Between Ford and Assems
Can any of the company-specific risk be diversified away by investing in both Ford and Assems 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 Assems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Assems Inc, you can compare the effects of market volatilities on Ford and Assems 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 Assems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Assems.
Diversification Opportunities for Ford and Assems
Good diversification
The 3 months correlation between Ford and Assems is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Assems Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assems Inc 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 Assems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assems Inc has no effect on the direction of Ford i.e., Ford and Assems go up and down completely randomly.
Pair Corralation between Ford and Assems
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.33 times more return on investment than Assems. However, Ford is 1.33 times more volatile than Assems Inc. It trades about 0.25 of its potential returns per unit of risk. Assems Inc is currently generating about -0.54 per unit of risk. If you would invest 1,008 in Ford Motor on September 2, 2024 and sell it today you would earn a total of 105.00 from holding Ford Motor or generate 10.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Assems Inc
Performance |
| Timeline |
| Ford Motor |
| Assems Inc |
Ford and Assems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Assems
The main advantage of trading using opposite Ford and Assems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Assems 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 Assems will offset losses from the drop in Assems' long position.The idea behind Ford Motor and Assems Inc 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.| Assems vs. Samsung Electronics Co | Assems vs. Samsung Electronics Co | Assems vs. LG Energy Solution | Assems vs. SK Hynix |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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