Correlation Between Ford and Amana Participation
Can any of the company-specific risk be diversified away by investing in both Ford and Amana Participation 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 Amana Participation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Amana Participation Fund, you can compare the effects of market volatilities on Ford and Amana Participation 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 Amana Participation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Amana Participation.
Diversification Opportunities for Ford and Amana Participation
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Amana is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Amana Participation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Participation 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 Amana Participation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Participation has no effect on the direction of Ford i.e., Ford and Amana Participation go up and down completely randomly.
Pair Corralation between Ford and Amana Participation
Taking into account the 90-day investment horizon Ford Motor is expected to generate 24.4 times more return on investment than Amana Participation. However, Ford is 24.4 times more volatile than Amana Participation Fund. It trades about 0.12 of its potential returns per unit of risk. Amana Participation Fund is currently generating about 0.06 per unit of risk. If you would invest 1,022 in Ford Motor on September 5, 2024 and sell it today you would earn a total of 52.00 from holding Ford Motor or generate 5.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Amana Participation Fund
Performance |
| Timeline |
| Ford Motor |
| Amana Participation |
Ford and Amana Participation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Amana Participation
The main advantage of trading using opposite Ford and Amana Participation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Amana Participation 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 Amana Participation will offset losses from the drop in Amana Participation's long position.The idea behind Ford Motor and Amana Participation 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.| Amana Participation vs. Amana Developing World | Amana Participation vs. Amana Growth Fund | Amana Participation vs. Amana Developing World | Amana Participation vs. Amana Income 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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