Correlation Between Ford and Sun Max
Can any of the company-specific risk be diversified away by investing in both Ford and Sun Max 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 Sun Max into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Sun Max Tech, you can compare the effects of market volatilities on Ford and Sun Max 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 Sun Max. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Sun Max.
Diversification Opportunities for Ford and Sun Max
Very weak diversification
The 3 months correlation between Ford and Sun is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sun Max Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Max Tech 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 Sun Max. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Max Tech has no effect on the direction of Ford i.e., Ford and Sun Max go up and down completely randomly.
Pair Corralation between Ford and Sun Max
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.2 times more return on investment than Sun Max. However, Ford is 1.2 times more volatile than Sun Max Tech. It trades about -0.01 of its potential returns per unit of risk. Sun Max Tech is currently generating about -0.04 per unit of risk. If you would invest 1,178 in Ford Motor on August 29, 2024 and sell it today you would lose (68.00) from holding Ford Motor or give up 5.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Sun Max Tech
Performance |
| Timeline |
| Ford Motor |
| Sun Max Tech |
Ford and Sun Max Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Sun Max
The main advantage of trading using opposite Ford and Sun Max positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Sun Max 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 Sun Max will offset losses from the drop in Sun Max's long position.The idea behind Ford Motor and Sun Max Tech 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.| Sun Max vs. ASRock Inc | Sun Max vs. Ko Ja Cayman | Sun Max vs. Chenbro Micom Co | Sun Max vs. Leadtek Research |
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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