Correlation Between Ford and Global Growth
Can any of the company-specific risk be diversified away by investing in both Ford and Global Growth 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 Global Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Global Growth Fund, you can compare the effects of market volatilities on Ford and Global Growth 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 Global Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Global Growth.
Diversification Opportunities for Ford and Global Growth
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and Global is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Global Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Growth 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 Global Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Growth has no effect on the direction of Ford i.e., Ford and Global Growth go up and down completely randomly.
Pair Corralation between Ford and Global Growth
Taking into account the 90-day investment horizon Ford is expected to generate 4.43 times less return on investment than Global Growth. In addition to that, Ford is 2.79 times more volatile than Global Growth Fund. It trades about 0.0 of its total potential returns per unit of risk. Global Growth Fund is currently generating about 0.06 per unit of volatility. If you would invest 1,291 in Global Growth Fund on September 12, 2024 and sell it today you would earn a total of 32.00 from holding Global Growth Fund or generate 2.48% 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. Global Growth Fund
Performance |
| Timeline |
| Ford Motor |
| Global Growth |
Ford and Global Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Global Growth
The main advantage of trading using opposite Ford and Global Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Global Growth 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 Global Growth will offset losses from the drop in Global Growth's long position.The idea behind Ford Motor and Global Growth Fund 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.| Global Growth vs. Mid Cap Value | Global Growth vs. Equity Growth Fund | Global Growth vs. Income Growth Fund | Global Growth vs. Diversified Bond Fund |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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