Correlation Between Ford and Federal Corp
Can any of the company-specific risk be diversified away by investing in both Ford and Federal Corp 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 Federal Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Federal Corp, you can compare the effects of market volatilities on Ford and Federal Corp 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 Federal Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Federal Corp.
Diversification Opportunities for Ford and Federal Corp
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Federal is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Federal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal 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 Federal Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Corp has no effect on the direction of Ford i.e., Ford and Federal Corp go up and down completely randomly.
Pair Corralation between Ford and Federal Corp
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.54 times more return on investment than Federal Corp. However, Ford is 1.54 times more volatile than Federal Corp. It trades about 0.01 of its potential returns per unit of risk. Federal Corp is currently generating about 0.01 per unit of risk. If you would invest 1,148 in Ford Motor on September 3, 2024 and sell it today you would lose (35.00) from holding Ford Motor or give up 3.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.97% |
| Values | Daily Returns |
Ford Motor vs. Federal Corp
Performance |
| Timeline |
| Ford Motor |
| Federal Corp |
Ford and Federal Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Federal Corp
The main advantage of trading using opposite Ford and Federal Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Federal Corp 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 Federal Corp will offset losses from the drop in Federal Corp's long position.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. Ford Motor |
| Federal Corp vs. Tainan Spinning Co | Federal Corp vs. Chia Her Industrial | Federal Corp vs. WiseChip Semiconductor | Federal Corp vs. Novatek Microelectronics Corp |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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