Correlation Between Ford and Asia Broadband
Can any of the company-specific risk be diversified away by investing in both Ford and Asia Broadband 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 Asia Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Asia Broadband, you can compare the effects of market volatilities on Ford and Asia Broadband 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 Asia Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Asia Broadband.
Diversification Opportunities for Ford and Asia Broadband
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Asia is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Asia Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Broadband 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 Asia Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Broadband has no effect on the direction of Ford i.e., Ford and Asia Broadband go up and down completely randomly.
Pair Corralation between Ford and Asia Broadband
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.35 times more return on investment than Asia Broadband. However, Ford Motor is 2.86 times less risky than Asia Broadband. It trades about 0.23 of its potential returns per unit of risk. Asia Broadband is currently generating about -0.06 per unit of risk. If you would invest 1,015 in Ford Motor on September 1, 2024 and sell it today you would earn a total of 98.00 from holding Ford Motor or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Asia Broadband
Performance |
| Timeline |
| Ford Motor |
| Asia Broadband |
Ford and Asia Broadband Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Asia Broadband
The main advantage of trading using opposite Ford and Asia Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Asia Broadband 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 Asia Broadband will offset losses from the drop in Asia Broadband's long position.The idea behind Ford Motor and Asia Broadband 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.| Asia Broadband vs. Fury Gold Mines | Asia Broadband vs. Lion Copper and | Asia Broadband vs. Trilogy Metals | Asia Broadband vs. Western Copper and |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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