Correlation Between Ford and Playmates Toys
Can any of the company-specific risk be diversified away by investing in both Ford and Playmates Toys 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 Playmates Toys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Playmates Toys Limited, you can compare the effects of market volatilities on Ford and Playmates Toys 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 Playmates Toys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Playmates Toys.
Diversification Opportunities for Ford and Playmates Toys
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Playmates is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Playmates Toys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playmates Toys 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 Playmates Toys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playmates Toys has no effect on the direction of Ford i.e., Ford and Playmates Toys go up and down completely randomly.
Pair Corralation between Ford and Playmates Toys
Taking into account the 90-day investment horizon Ford is expected to generate 3.7 times less return on investment than Playmates Toys. But when comparing it to its historical volatility, Ford Motor is 6.3 times less risky than Playmates Toys. It trades about 0.07 of its potential returns per unit of risk. Playmates Toys Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6.60 in Playmates Toys Limited on November 4, 2024 and sell it today you would lose (0.10) from holding Playmates Toys Limited or give up 1.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Ford Motor vs. Playmates Toys Limited
Performance |
| Timeline |
| Ford Motor |
| Playmates Toys |
Ford and Playmates Toys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Playmates Toys
The main advantage of trading using opposite Ford and Playmates Toys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Playmates Toys 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 Playmates Toys will offset losses from the drop in Playmates Toys' long position.The idea behind Ford Motor and Playmates Toys Limited 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.| Playmates Toys vs. FUYO GENERAL LEASE | Playmates Toys vs. GALENA MINING LTD | Playmates Toys vs. ARDAGH METAL PACDL 0001 | Playmates Toys vs. SERI INDUSTRIAL EO |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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