Correlation Between Ford and Postal Savings
Can any of the company-specific risk be diversified away by investing in both Ford and Postal Savings 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 Postal Savings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Postal Savings Bank, you can compare the effects of market volatilities on Ford and Postal Savings 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 Postal Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Postal Savings.
Diversification Opportunities for Ford and Postal Savings
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and Postal is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank 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 Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of Ford i.e., Ford and Postal Savings go up and down completely randomly.
Pair Corralation between Ford and Postal Savings
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Postal Savings. In addition to that, Ford is 1.47 times more volatile than Postal Savings Bank. It trades about 0.0 of its total potential returns per unit of risk. Postal Savings Bank is currently generating about 0.01 per unit of volatility. If you would invest 54.00 in Postal Savings Bank on August 28, 2024 and sell it today you would earn a total of 0.00 from holding Postal Savings Bank or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Postal Savings Bank
Performance |
| Timeline |
| Ford Motor |
| Postal Savings Bank |
Ford and Postal Savings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Postal Savings
The main advantage of trading using opposite Ford and Postal Savings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Postal Savings 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 Postal Savings will offset losses from the drop in Postal Savings' long position.The idea behind Ford Motor and Postal Savings Bank 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.| Postal Savings vs. Deutsche Bank Aktiengesellschaft | Postal Savings vs. Superior Plus Corp | Postal Savings vs. NMI Holdings | Postal Savings vs. Origin Agritech |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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