Correlation Between Ford and Armstrong Flooring
Can any of the company-specific risk be diversified away by investing in both Ford and Armstrong Flooring 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 Armstrong Flooring into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Armstrong Flooring, you can compare the effects of market volatilities on Ford and Armstrong Flooring 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 Armstrong Flooring. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Armstrong Flooring.
Diversification Opportunities for Ford and Armstrong Flooring
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Armstrong is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Armstrong Flooring in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armstrong Flooring 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 Armstrong Flooring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armstrong Flooring has no effect on the direction of Ford i.e., Ford and Armstrong Flooring go up and down completely randomly.
Pair Corralation between Ford and Armstrong Flooring
If you would invest 1.00 in Armstrong Flooring on October 26, 2024 and sell it today you would earn a total of 0.00 from holding Armstrong Flooring or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 2.5% |
| Values | Daily Returns |
Ford Motor vs. Armstrong Flooring
Performance |
| Timeline |
| Ford Motor |
| Armstrong Flooring |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Armstrong Flooring Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Armstrong Flooring
The main advantage of trading using opposite Ford and Armstrong Flooring positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Armstrong Flooring 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 Armstrong Flooring will offset losses from the drop in Armstrong Flooring's long position.The idea behind Ford Motor and Armstrong Flooring 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.| Armstrong Flooring vs. Travis Perkins PLC | Armstrong Flooring vs. Armstrong World Industries | Armstrong Flooring vs. Apogee Enterprises | Armstrong Flooring vs. Quanex Building Products |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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