Correlation Between Ford and Wei Chih
Can any of the company-specific risk be diversified away by investing in both Ford and Wei Chih 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 Wei Chih into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Wei Chih Steel, you can compare the effects of market volatilities on Ford and Wei Chih 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 Wei Chih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Wei Chih.
Diversification Opportunities for Ford and Wei Chih
Very good diversification
The 3 months correlation between Ford and Wei is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Wei Chih Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wei Chih Steel 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 Wei Chih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wei Chih Steel has no effect on the direction of Ford i.e., Ford and Wei Chih go up and down completely randomly.
Pair Corralation between Ford and Wei Chih
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.19 times more return on investment than Wei Chih. However, Ford is 1.19 times more volatile than Wei Chih Steel. It trades about 0.0 of its potential returns per unit of risk. Wei Chih Steel is currently generating about -0.01 per unit of risk. If you would invest 1,236 in Ford Motor on August 31, 2024 and sell it today you would lose (123.00) from holding Ford Motor or give up 9.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.59% |
| Values | Daily Returns |
Ford Motor vs. Wei Chih Steel
Performance |
| Timeline |
| Ford Motor |
| Wei Chih Steel |
Ford and Wei Chih Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Wei Chih
The main advantage of trading using opposite Ford and Wei Chih positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Wei Chih 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 Wei Chih will offset losses from the drop in Wei Chih's long position.The idea behind Ford Motor and Wei Chih Steel 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.| Wei Chih vs. Basso Industry Corp | Wei Chih vs. Chung Hsin Electric Machinery | Wei Chih vs. TYC Brother Industrial | Wei Chih vs. TECO Electric Machinery |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |