Correlation Between Ford and AFRICAN DISTILLERS
Can any of the company-specific risk be diversified away by investing in both Ford and AFRICAN DISTILLERS 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 DISTILLERS 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 DISTILLERS LIMITED, you can compare the effects of market volatilities on Ford and AFRICAN DISTILLERS 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 DISTILLERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and AFRICAN DISTILLERS.
Diversification Opportunities for Ford and AFRICAN DISTILLERS
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and AFRICAN is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AFRICAN DISTILLERS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFRICAN DISTILLERS 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 DISTILLERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFRICAN DISTILLERS has no effect on the direction of Ford i.e., Ford and AFRICAN DISTILLERS go up and down completely randomly.
Pair Corralation between Ford and AFRICAN DISTILLERS
Taking into account the 90-day investment horizon Ford Motor is expected to generate 5.59 times more return on investment than AFRICAN DISTILLERS. However, Ford is 5.59 times more volatile than AFRICAN DISTILLERS LIMITED. It trades about 0.09 of its potential returns per unit of risk. AFRICAN DISTILLERS LIMITED is currently generating about 0.22 per unit of risk. If you would invest 988.00 in Ford Motor on October 29, 2024 and sell it today you would earn a total of 24.00 from holding Ford Motor or generate 2.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.0% |
| Values | Daily Returns |
Ford Motor vs. AFRICAN DISTILLERS LIMITED
Performance |
| Timeline |
| Ford Motor |
| AFRICAN DISTILLERS |
Ford and AFRICAN DISTILLERS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and AFRICAN DISTILLERS
The main advantage of trading using opposite Ford and AFRICAN DISTILLERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, AFRICAN DISTILLERS 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 DISTILLERS will offset losses from the drop in AFRICAN DISTILLERS's long position.The idea behind Ford Motor and AFRICAN DISTILLERS 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.| AFRICAN DISTILLERS vs. FIRST MUTUAL PROPERTIES | AFRICAN DISTILLERS vs. BRITISH AMERICAN TOBACCO | AFRICAN DISTILLERS vs. TANGANDA TEA PANY | AFRICAN DISTILLERS vs. ZB FINANCIAL HOLDINGS |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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