Correlation Between Ford and American Leisure
Can any of the company-specific risk be diversified away by investing in both Ford and American Leisure 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 American Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and American Leisure Holdings, you can compare the effects of market volatilities on Ford and American Leisure 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 American Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and American Leisure.
Diversification Opportunities for Ford and American Leisure
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and American is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and American Leisure Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Leisure Holdings 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 American Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Leisure Holdings has no effect on the direction of Ford i.e., Ford and American Leisure go up and down completely randomly.
Pair Corralation between Ford and American Leisure
Taking into account the 90-day investment horizon Ford is expected to generate 78.52 times less return on investment than American Leisure. But when comparing it to its historical volatility, Ford Motor is 18.61 times less risky than American Leisure. It trades about 0.04 of its potential returns per unit of risk. American Leisure Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 0.03 in American Leisure Holdings on August 24, 2024 and sell it today you would lose (0.02) from holding American Leisure Holdings or give up 66.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Ford Motor vs. American Leisure Holdings
Performance |
| Timeline |
| Ford Motor |
| American Leisure Holdings |
Ford and American Leisure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and American Leisure
The main advantage of trading using opposite Ford and American Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, American Leisure 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 American Leisure will offset losses from the drop in American Leisure's long position.The idea behind Ford Motor and American Leisure Holdings 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.| American Leisure vs. Absolute Health and | American Leisure vs. Supurva Healthcare Group | American Leisure vs. China Health Management | American Leisure vs. Embrace Change Acquisition |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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