Correlation Between Ford and Jia Jie
Can any of the company-specific risk be diversified away by investing in both Ford and Jia Jie 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 Jia Jie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Jia Jie Biomedical, you can compare the effects of market volatilities on Ford and Jia Jie 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 Jia Jie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Jia Jie.
Diversification Opportunities for Ford and Jia Jie
Poor diversification
The 3 months correlation between Ford and Jia is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Jia Jie Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jia Jie Biomedical 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 Jia Jie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jia Jie Biomedical has no effect on the direction of Ford i.e., Ford and Jia Jie go up and down completely randomly.
Pair Corralation between Ford and Jia Jie
Taking into account the 90-day investment horizon Ford is expected to generate 3.71 times less return on investment than Jia Jie. But when comparing it to its historical volatility, Ford Motor is 2.58 times less risky than Jia Jie. It trades about 0.07 of its potential returns per unit of risk. Jia Jie Biomedical is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,015 in Jia Jie Biomedical on November 4, 2024 and sell it today you would earn a total of 105.00 from holding Jia Jie Biomedical or generate 5.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 75.0% |
| Values | Daily Returns |
Ford Motor vs. Jia Jie Biomedical
Performance |
| Timeline |
| Ford Motor |
| Jia Jie Biomedical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Jia Jie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Jia Jie
The main advantage of trading using opposite Ford and Jia Jie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Jia Jie 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 Jia Jie will offset losses from the drop in Jia Jie's long position.The idea behind Ford Motor and Jia Jie Biomedical 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.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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