Correlation Between Ford and AmerisourceBergen
Can any of the company-specific risk be diversified away by investing in both Ford and AmerisourceBergen 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 AmerisourceBergen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and AmerisourceBergen, you can compare the effects of market volatilities on Ford and AmerisourceBergen 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 AmerisourceBergen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and AmerisourceBergen.
Diversification Opportunities for Ford and AmerisourceBergen
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and AmerisourceBergen is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AmerisourceBergen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmerisourceBergen 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 AmerisourceBergen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmerisourceBergen has no effect on the direction of Ford i.e., Ford and AmerisourceBergen go up and down completely randomly.
Pair Corralation between Ford and AmerisourceBergen
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the AmerisourceBergen. In addition to that, Ford is 1.36 times more volatile than AmerisourceBergen. It trades about -0.21 of its total potential returns per unit of risk. AmerisourceBergen is currently generating about -0.1 per unit of volatility. If you would invest 22,921 in AmerisourceBergen on September 12, 2024 and sell it today you would lose (626.00) from holding AmerisourceBergen or give up 2.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ford Motor vs. AmerisourceBergen
Performance |
| Timeline |
| Ford Motor |
| AmerisourceBergen |
Ford and AmerisourceBergen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and AmerisourceBergen
The main advantage of trading using opposite Ford and AmerisourceBergen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, AmerisourceBergen 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 AmerisourceBergen will offset losses from the drop in AmerisourceBergen's long position.The idea behind Ford Motor and AmerisourceBergen 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.| AmerisourceBergen vs. X FAB Silicon Foundries | AmerisourceBergen vs. TIANDE CHEMICAL | AmerisourceBergen vs. Sekisui Chemical Co | AmerisourceBergen vs. GALENA MINING LTD |
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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