Correlation Between Ford and Merida Industry
Can any of the company-specific risk be diversified away by investing in both Ford and Merida Industry 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 Merida Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Merida Industry Co, you can compare the effects of market volatilities on Ford and Merida Industry 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 Merida Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Merida Industry.
Diversification Opportunities for Ford and Merida Industry
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Merida is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Merida Industry Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merida Industry 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 Merida Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merida Industry has no effect on the direction of Ford i.e., Ford and Merida Industry go up and down completely randomly.
Pair Corralation between Ford and Merida Industry
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.03 times more return on investment than Merida Industry. However, Ford is 1.03 times more volatile than Merida Industry Co. It trades about 0.01 of its potential returns per unit of risk. Merida Industry Co is currently generating about -0.01 per unit of risk. If you would invest 1,132 in Ford Motor on August 26, 2024 and sell it today you would lose (14.00) from holding Ford Motor or give up 1.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.58% |
| Values | Daily Returns |
Ford Motor vs. Merida Industry Co
Performance |
| Timeline |
| Ford Motor |
| Merida Industry |
Ford and Merida Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Merida Industry
The main advantage of trading using opposite Ford and Merida Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Merida Industry 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 Merida Industry will offset losses from the drop in Merida Industry's long position.The idea behind Ford Motor and Merida Industry Co 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.| Merida Industry vs. Taiwan Semiconductor Manufacturing | Merida Industry vs. Hon Hai Precision | Merida Industry vs. MediaTek | Merida Industry vs. Chunghwa Telecom Co |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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