Correlation Between Ford and An Phat
Can any of the company-specific risk be diversified away by investing in both Ford and An Phat 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 An Phat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and An Phat Plastic, you can compare the effects of market volatilities on Ford and An Phat 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 An Phat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and An Phat.
Diversification Opportunities for Ford and An Phat
Good diversification
The 3 months correlation between Ford and AAA is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and An Phat Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on An Phat Plastic 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 An Phat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of An Phat Plastic has no effect on the direction of Ford i.e., Ford and An Phat go up and down completely randomly.
Pair Corralation between Ford and An Phat
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.63 times more return on investment than An Phat. However, Ford is 1.63 times more volatile than An Phat Plastic. It trades about 0.05 of its potential returns per unit of risk. An Phat Plastic is currently generating about -0.22 per unit of risk. If you would invest 1,091 in Ford Motor on August 24, 2024 and sell it today you would earn a total of 27.00 from holding Ford Motor or generate 2.47% 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. An Phat Plastic
Performance |
| Timeline |
| Ford Motor |
| An Phat Plastic |
Ford and An Phat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and An Phat
The main advantage of trading using opposite Ford and An Phat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, An Phat 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 An Phat will offset losses from the drop in An Phat's long position.The idea behind Ford Motor and An Phat Plastic 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.| An Phat vs. FIT INVEST JSC | An Phat vs. Damsan JSC | An Phat vs. APG Securities Joint | An Phat vs. Binhthuan Agriculture Services |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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