Correlation Between Ford and AIA Group
Can any of the company-specific risk be diversified away by investing in both Ford and AIA 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 AIA 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 AIA Group Ltd, you can compare the effects of market volatilities on Ford and AIA 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 AIA Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and AIA Group.
Diversification Opportunities for Ford and AIA Group
Very good diversification
The 3 months correlation between Ford and AIA is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AIA Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIA Group 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 AIA Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIA Group has no effect on the direction of Ford i.e., Ford and AIA Group go up and down completely randomly.
Pair Corralation between Ford and AIA Group
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.61 times more return on investment than AIA Group. However, Ford is 1.61 times more volatile than AIA Group Ltd. It trades about 0.04 of its potential returns per unit of risk. AIA Group Ltd is currently generating about -0.3 per unit of risk. If you would invest 1,122 in Ford Motor on August 28, 2024 and sell it today you would earn a total of 18.00 from holding Ford Motor or generate 1.6% 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. AIA Group Ltd
Performance |
| Timeline |
| Ford Motor |
| AIA Group |
Ford and AIA Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and AIA Group
The main advantage of trading using opposite Ford and AIA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, AIA 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 AIA Group will offset losses from the drop in AIA Group's long position.The idea behind Ford Motor and AIA Group Ltd 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.| AIA Group vs. CNO Financial Group | AIA Group vs. Genworth Financial | AIA Group vs. MetLife Preferred Stock | AIA Group vs. Prudential Public Limited |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |