Correlation Between Ford and Bonny Worldwide
Can any of the company-specific risk be diversified away by investing in both Ford and Bonny Worldwide 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 Bonny Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Bonny Worldwide, you can compare the effects of market volatilities on Ford and Bonny Worldwide 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 Bonny Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Bonny Worldwide.
Diversification Opportunities for Ford and Bonny Worldwide
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Bonny is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Bonny Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonny Worldwide 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 Bonny Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonny Worldwide has no effect on the direction of Ford i.e., Ford and Bonny Worldwide go up and down completely randomly.
Pair Corralation between Ford and Bonny Worldwide
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Bonny Worldwide. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.24 times less risky than Bonny Worldwide. The stock trades about 0.0 of its potential returns per unit of risk. The Bonny Worldwide is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 26,150 in Bonny Worldwide on August 29, 2024 and sell it today you would earn a total of 1,850 from holding Bonny Worldwide or generate 7.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Bonny Worldwide
Performance |
| Timeline |
| Ford Motor |
| Bonny Worldwide |
Ford and Bonny Worldwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Bonny Worldwide
The main advantage of trading using opposite Ford and Bonny Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Bonny Worldwide 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 Bonny Worldwide will offset losses from the drop in Bonny Worldwide's long position.The idea behind Ford Motor and Bonny Worldwide 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.| Bonny Worldwide vs. Feng Tay Enterprises | Bonny Worldwide vs. Ruentex Materials Co | Bonny Worldwide vs. Symtek Automation Asia | Bonny Worldwide vs. CTCI Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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