Correlation Between Ford and Space Shuttle
Can any of the company-specific risk be diversified away by investing in both Ford and Space Shuttle 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 Space Shuttle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Space Shuttle Hi Tech, you can compare the effects of market volatilities on Ford and Space Shuttle 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 Space Shuttle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Space Shuttle.
Diversification Opportunities for Ford and Space Shuttle
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Space is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Space Shuttle Hi Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Space Shuttle Hi 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 Space Shuttle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Space Shuttle Hi has no effect on the direction of Ford i.e., Ford and Space Shuttle go up and down completely randomly.
Pair Corralation between Ford and Space Shuttle
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.32 times more return on investment than Space Shuttle. However, Ford is 1.32 times more volatile than Space Shuttle Hi Tech. It trades about 0.25 of its potential returns per unit of risk. Space Shuttle Hi Tech is currently generating about -0.31 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. Space Shuttle Hi Tech
Performance |
| Timeline |
| Ford Motor |
| Space Shuttle Hi |
Ford and Space Shuttle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Space Shuttle
The main advantage of trading using opposite Ford and Space Shuttle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Space Shuttle 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 Space Shuttle will offset losses from the drop in Space Shuttle's long position.The idea behind Ford Motor and Space Shuttle Hi Tech 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.| Space Shuttle vs. Universal Microelectronics Co | Space Shuttle vs. Greatek Electronics | Space Shuttle vs. Phihong Technology Co | Space Shuttle vs. Zippy Technology 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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