Correlation Between Ford and AFRICAN DOMESTIC
Can any of the company-specific risk be diversified away by investing in both Ford and AFRICAN DOMESTIC 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 AFRICAN DOMESTIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and AFRICAN DOMESTIC BOND, you can compare the effects of market volatilities on Ford and AFRICAN DOMESTIC 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 AFRICAN DOMESTIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and AFRICAN DOMESTIC.
Diversification Opportunities for Ford and AFRICAN DOMESTIC
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and AFRICAN is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AFRICAN DOMESTIC BOND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFRICAN DOMESTIC BOND 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 AFRICAN DOMESTIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFRICAN DOMESTIC BOND has no effect on the direction of Ford i.e., Ford and AFRICAN DOMESTIC go up and down completely randomly.
Pair Corralation between Ford and AFRICAN DOMESTIC
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the AFRICAN DOMESTIC. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.48 times less risky than AFRICAN DOMESTIC. The stock trades about -0.07 of its potential returns per unit of risk. The AFRICAN DOMESTIC BOND is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 616.00 in AFRICAN DOMESTIC BOND on October 26, 2024 and sell it today you would earn a total of 17.00 from holding AFRICAN DOMESTIC BOND or generate 2.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.72% |
| Values | Daily Returns |
Ford Motor vs. AFRICAN DOMESTIC BOND
Performance |
| Timeline |
| Ford Motor |
| AFRICAN DOMESTIC BOND |
Ford and AFRICAN DOMESTIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and AFRICAN DOMESTIC
The main advantage of trading using opposite Ford and AFRICAN DOMESTIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, AFRICAN DOMESTIC 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 AFRICAN DOMESTIC will offset losses from the drop in AFRICAN DOMESTIC's long position.The idea behind Ford Motor and AFRICAN DOMESTIC BOND 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.| AFRICAN DOMESTIC vs. AGAPE GLOBAL INVESTMENTS | AFRICAN DOMESTIC vs. CONSTANCE HOTELS SERVICES | AFRICAN DOMESTIC vs. NEW MAURITIUS HOTELS | AFRICAN DOMESTIC vs. PHOENIX INVESTMENT PANY |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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