Correlation Between Ford and AmTrust Financial
Can any of the company-specific risk be diversified away by investing in both Ford and AmTrust Financial 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 AmTrust Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and AmTrust Financial Services, you can compare the effects of market volatilities on Ford and AmTrust Financial 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 AmTrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and AmTrust Financial.
Diversification Opportunities for Ford and AmTrust Financial
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and AmTrust is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial 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 AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of Ford i.e., Ford and AmTrust Financial go up and down completely randomly.
Pair Corralation between Ford and AmTrust Financial
Taking into account the 90-day investment horizon Ford is expected to generate 2.82 times less return on investment than AmTrust Financial. In addition to that, Ford is 1.21 times more volatile than AmTrust Financial Services. It trades about 0.03 of its total potential returns per unit of risk. AmTrust Financial Services is currently generating about 0.09 per unit of volatility. If you would invest 1,362 in AmTrust Financial Services on August 25, 2024 and sell it today you would earn a total of 118.00 from holding AmTrust Financial Services or generate 8.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. AmTrust Financial Services
Performance |
| Timeline |
| Ford Motor |
| AmTrust Financial |
Ford and AmTrust Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and AmTrust Financial
The main advantage of trading using opposite Ford and AmTrust Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, AmTrust Financial 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 AmTrust Financial will offset losses from the drop in AmTrust Financial's long position.The idea behind Ford Motor and AmTrust Financial Services 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.| AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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