Correlation Between Ford and Aban Offshore
Can any of the company-specific risk be diversified away by investing in both Ford and Aban Offshore 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 Aban Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Aban Offshore Limited, you can compare the effects of market volatilities on Ford and Aban Offshore 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 Aban Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Aban Offshore.
Diversification Opportunities for Ford and Aban Offshore
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Aban is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aban Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aban Offshore Limited 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 Aban Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aban Offshore Limited has no effect on the direction of Ford i.e., Ford and Aban Offshore go up and down completely randomly.
Pair Corralation between Ford and Aban Offshore
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.07 times more return on investment than Aban Offshore. However, Ford is 1.07 times more volatile than Aban Offshore Limited. It trades about 0.04 of its potential returns per unit of risk. Aban Offshore Limited is currently generating about -0.05 per unit of risk. If you would invest 1,122 in Ford Motor on August 27, 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 | 95.24% |
| Values | Daily Returns |
Ford Motor vs. Aban Offshore Limited
Performance |
| Timeline |
| Ford Motor |
| Aban Offshore Limited |
Ford and Aban Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Aban Offshore
The main advantage of trading using opposite Ford and Aban Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Aban Offshore 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 Aban Offshore will offset losses from the drop in Aban Offshore's long position.The idea behind Ford Motor and Aban Offshore Limited 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.| Aban Offshore vs. Digjam Limited | Aban Offshore vs. Gujarat Raffia Industries | Aban Offshore vs. Kingfa Science Technology | Aban Offshore vs. Rico Auto Industries |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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