Correlation Between Ford and Incar Financial
Can any of the company-specific risk be diversified away by investing in both Ford and Incar Financial 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 Incar Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Incar Financial Service, you can compare the effects of market volatilities on Ford and Incar Financial 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 Incar Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Incar Financial.
Diversification Opportunities for Ford and Incar Financial
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Incar is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Incar Financial Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incar Financial Service 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 Incar Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incar Financial Service has no effect on the direction of Ford i.e., Ford and Incar Financial go up and down completely randomly.
Pair Corralation between Ford and Incar Financial
Taking into account the 90-day investment horizon Ford is expected to generate 1.93 times less return on investment than Incar Financial. But when comparing it to its historical volatility, Ford Motor is 2.12 times less risky than Incar Financial. It trades about 0.23 of its potential returns per unit of risk. Incar Financial Service is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 539,000 in Incar Financial Service on September 1, 2024 and sell it today you would earn a total of 104,000 from holding Incar Financial Service or generate 19.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Incar Financial Service
Performance |
| Timeline |
| Ford Motor |
| Incar Financial Service |
Ford and Incar Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Incar Financial
The main advantage of trading using opposite Ford and Incar Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Incar Financial 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 Incar Financial will offset losses from the drop in Incar Financial's long position.The idea behind Ford Motor and Incar Financial Service 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.| Incar Financial vs. Busan Industrial Co | Incar Financial vs. Busan Ind | Incar Financial vs. Mirae Asset Daewoo | Incar Financial vs. Finebesteel |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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