Correlation Between Ford and BES Engineering
Can any of the company-specific risk be diversified away by investing in both Ford and BES Engineering 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 BES Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BES Engineering Co, you can compare the effects of market volatilities on Ford and BES Engineering 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 BES Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BES Engineering.
Diversification Opportunities for Ford and BES Engineering
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and BES is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BES Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BES Engineering 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 BES Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BES Engineering has no effect on the direction of Ford i.e., Ford and BES Engineering go up and down completely randomly.
Pair Corralation between Ford and BES Engineering
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.77 times more return on investment than BES Engineering. However, Ford Motor is 1.29 times less risky than BES Engineering. It trades about 0.04 of its potential returns per unit of risk. BES Engineering Co is currently generating about -0.08 per unit of risk. If you would invest 1,007 in Ford Motor on October 26, 2024 and sell it today you would earn a total of 9.00 from holding Ford Motor or generate 0.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 85.71% |
| Values | Daily Returns |
Ford Motor vs. BES Engineering Co
Performance |
| Timeline |
| Ford Motor |
| BES Engineering |
Ford and BES Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BES Engineering
The main advantage of trading using opposite Ford and BES Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, BES Engineering 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 BES Engineering will offset losses from the drop in BES Engineering's long position.The idea behind Ford Motor and BES Engineering Co 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.| BES Engineering vs. Hung Sheng Construction | BES Engineering vs. Taiwan Glass Ind | BES Engineering vs. China Petrochemical Development | BES Engineering vs. Taiwan Tea 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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