Correlation Between Ford and BenQ Materials
Can any of the company-specific risk be diversified away by investing in both Ford and BenQ Materials 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 BenQ Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BenQ Materials Corp, you can compare the effects of market volatilities on Ford and BenQ Materials 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 BenQ Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BenQ Materials.
Diversification Opportunities for Ford and BenQ Materials
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and BenQ is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BenQ Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BenQ Materials Corp 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 BenQ Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BenQ Materials Corp has no effect on the direction of Ford i.e., Ford and BenQ Materials go up and down completely randomly.
Pair Corralation between Ford and BenQ Materials
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.15 times more return on investment than BenQ Materials. However, Ford is 1.15 times more volatile than BenQ Materials Corp. It trades about 0.25 of its potential returns per unit of risk. BenQ Materials Corp is currently generating about 0.03 per unit of risk. If you would invest 1,008 in Ford Motor on September 2, 2024 and sell it today you would earn a total of 105.00 from holding Ford Motor or generate 10.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. BenQ Materials Corp
Performance |
| Timeline |
| Ford Motor |
| BenQ Materials Corp |
Ford and BenQ Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BenQ Materials
The main advantage of trading using opposite Ford and BenQ Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, BenQ Materials 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 BenQ Materials will offset losses from the drop in BenQ Materials' long position.The idea behind Ford Motor and BenQ Materials Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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