Correlation Between Ford and Cogelec SA
Can any of the company-specific risk be diversified away by investing in both Ford and Cogelec SA 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 Cogelec SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Cogelec SA, you can compare the effects of market volatilities on Ford and Cogelec SA 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 Cogelec SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Cogelec SA.
Diversification Opportunities for Ford and Cogelec SA
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Cogelec is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cogelec SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogelec SA 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 Cogelec SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogelec SA has no effect on the direction of Ford i.e., Ford and Cogelec SA go up and down completely randomly.
Pair Corralation between Ford and Cogelec SA
Taking into account the 90-day investment horizon Ford is expected to generate 10.21 times less return on investment than Cogelec SA. But when comparing it to its historical volatility, Ford Motor is 1.05 times less risky than Cogelec SA. It trades about 0.03 of its potential returns per unit of risk. Cogelec SA is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,080 in Cogelec SA on August 31, 2024 and sell it today you would earn a total of 490.00 from holding Cogelec SA or generate 45.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Ford Motor vs. Cogelec SA
Performance |
| Timeline |
| Ford Motor |
| Cogelec SA |
Ford and Cogelec SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Cogelec SA
The main advantage of trading using opposite Ford and Cogelec SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Cogelec SA 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 Cogelec SA will offset losses from the drop in Cogelec SA's long position.The idea behind Ford Motor and Cogelec SA 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.| Cogelec SA vs. Ekinops SA | Cogelec SA vs. Damartex | Cogelec SA vs. Graines Voltz SA | Cogelec SA vs. Riber SA |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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