Correlation Between Ford and GFL ENVIRONM
Can any of the company-specific risk be diversified away by investing in both Ford and GFL ENVIRONM 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 GFL ENVIRONM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and GFL ENVIRONM, you can compare the effects of market volatilities on Ford and GFL ENVIRONM 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 GFL ENVIRONM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and GFL ENVIRONM.
Diversification Opportunities for Ford and GFL ENVIRONM
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and GFL is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and GFL ENVIRONM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GFL ENVIRONM 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 GFL ENVIRONM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GFL ENVIRONM has no effect on the direction of Ford i.e., Ford and GFL ENVIRONM go up and down completely randomly.
Pair Corralation between Ford and GFL ENVIRONM
Taking into account the 90-day investment horizon Ford is expected to generate 3.67 times less return on investment than GFL ENVIRONM. In addition to that, Ford is 1.18 times more volatile than GFL ENVIRONM. It trades about 0.02 of its total potential returns per unit of risk. GFL ENVIRONM is currently generating about 0.09 per unit of volatility. If you would invest 3,116 in GFL ENVIRONM on August 28, 2024 and sell it today you would earn a total of 1,244 from holding GFL ENVIRONM or generate 39.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.58% |
| Values | Daily Returns |
Ford Motor vs. GFL ENVIRONM
Performance |
| Timeline |
| Ford Motor |
| GFL ENVIRONM |
Ford and GFL ENVIRONM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and GFL ENVIRONM
The main advantage of trading using opposite Ford and GFL ENVIRONM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, GFL ENVIRONM 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 GFL ENVIRONM will offset losses from the drop in GFL ENVIRONM's long position.The idea behind Ford Motor and GFL ENVIRONM 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.| GFL ENVIRONM vs. Superior Plus Corp | GFL ENVIRONM vs. NMI Holdings | GFL ENVIRONM vs. Origin Agritech | GFL ENVIRONM vs. SIVERS SEMICONDUCTORS AB |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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