Correlation Between Ford and Arab Dairy
Can any of the company-specific risk be diversified away by investing in both Ford and Arab Dairy 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 Arab Dairy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and The Arab Dairy, you can compare the effects of market volatilities on Ford and Arab Dairy 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 Arab Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Arab Dairy.
Diversification Opportunities for Ford and Arab Dairy
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Arab is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and The Arab Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arab Dairy 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 Arab Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arab Dairy has no effect on the direction of Ford i.e., Ford and Arab Dairy go up and down completely randomly.
Pair Corralation between Ford and Arab Dairy
Taking into account the 90-day investment horizon Ford is expected to generate 4.1 times less return on investment than Arab Dairy. But when comparing it to its historical volatility, Ford Motor is 1.86 times less risky than Arab Dairy. It trades about 0.17 of its potential returns per unit of risk. The Arab Dairy is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 262.00 in The Arab Dairy on August 31, 2024 and sell it today you would earn a total of 72.00 from holding The Arab Dairy or generate 27.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 81.82% |
| Values | Daily Returns |
Ford Motor vs. The Arab Dairy
Performance |
| Timeline |
| Ford Motor |
| Arab Dairy |
Ford and Arab Dairy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Arab Dairy
The main advantage of trading using opposite Ford and Arab Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Arab Dairy 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 Arab Dairy will offset losses from the drop in Arab Dairy's long position.The idea behind Ford Motor and The Arab Dairy 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.| Arab Dairy vs. Paint Chemicals Industries | Arab Dairy vs. Reacap Financial Investments | Arab Dairy vs. Egyptians For Investment | Arab Dairy vs. Misr Oils Soap |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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