Correlation Between Ford and Australian Bond
Can any of the company-specific risk be diversified away by investing in both Ford and Australian Bond 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 Australian Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Australian Bond Exchange, you can compare the effects of market volatilities on Ford and Australian Bond 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 Australian Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Australian Bond.
Diversification Opportunities for Ford and Australian Bond
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Australian is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Australian Bond Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Bond Exchange 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 Australian Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Bond Exchange has no effect on the direction of Ford i.e., Ford and Australian Bond go up and down completely randomly.
Pair Corralation between Ford and Australian Bond
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.21 times more return on investment than Australian Bond. However, Ford Motor is 4.87 times less risky than Australian Bond. It trades about 0.0 of its potential returns per unit of risk. Australian Bond Exchange is currently generating about -0.01 per unit of risk. If you would invest 1,159 in Ford Motor on November 8, 2024 and sell it today you would lose (158.00) from holding Ford Motor or give up 13.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
Ford Motor vs. Australian Bond Exchange
Performance |
| Timeline |
| Ford Motor |
| Australian Bond Exchange |
Ford and Australian Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Australian Bond
The main advantage of trading using opposite Ford and Australian Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Australian Bond 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 Australian Bond will offset losses from the drop in Australian Bond's long position.The idea behind Ford Motor and Australian Bond Exchange 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.| Australian Bond vs. Hotel Property Investments | Australian Bond vs. Dynamic Drill And | Australian Bond vs. Gtn | Australian Bond vs. Nufarm |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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