Correlation Between Ford and AIB Group
Can any of the company-specific risk be diversified away by investing in both Ford and AIB Group 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 AIB Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and AIB Group PLC, you can compare the effects of market volatilities on Ford and AIB Group 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 AIB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and AIB Group.
Diversification Opportunities for Ford and AIB Group
Modest diversification
The 3 months correlation between Ford and AIB is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AIB Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIB Group PLC 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 AIB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIB Group PLC has no effect on the direction of Ford i.e., Ford and AIB Group go up and down completely randomly.
Pair Corralation between Ford and AIB Group
Taking into account the 90-day investment horizon Ford is expected to generate 1.34 times less return on investment than AIB Group. In addition to that, Ford is 1.24 times more volatile than AIB Group PLC. It trades about 0.04 of its total potential returns per unit of risk. AIB Group PLC is currently generating about 0.06 per unit of volatility. If you would invest 420.00 in AIB Group PLC on August 24, 2024 and sell it today you would earn a total of 120.00 from holding AIB Group PLC or generate 28.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Ford Motor vs. AIB Group PLC
Performance |
| Timeline |
| Ford Motor |
| AIB Group PLC |
Ford and AIB Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and AIB Group
The main advantage of trading using opposite Ford and AIB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, AIB Group 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 AIB Group will offset losses from the drop in AIB Group's long position.The idea behind Ford Motor and AIB Group PLC 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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