Correlation Between Ford and InfraCap MLP
Can any of the company-specific risk be diversified away by investing in both Ford and InfraCap MLP 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 InfraCap MLP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and InfraCap MLP ETF, you can compare the effects of market volatilities on Ford and InfraCap MLP 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 InfraCap MLP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and InfraCap MLP.
Diversification Opportunities for Ford and InfraCap MLP
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and InfraCap is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and InfraCap MLP ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InfraCap MLP ETF 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 InfraCap MLP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InfraCap MLP ETF has no effect on the direction of Ford i.e., Ford and InfraCap MLP go up and down completely randomly.
Pair Corralation between Ford and InfraCap MLP
Taking into account the 90-day investment horizon Ford is expected to generate 2.25 times less return on investment than InfraCap MLP. In addition to that, Ford is 1.55 times more volatile than InfraCap MLP ETF. It trades about 0.17 of its total potential returns per unit of risk. InfraCap MLP ETF is currently generating about 0.61 per unit of volatility. If you would invest 3,973 in InfraCap MLP ETF on August 31, 2024 and sell it today you would earn a total of 769.00 from holding InfraCap MLP ETF or generate 19.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ford Motor vs. InfraCap MLP ETF
Performance |
| Timeline |
| Ford Motor |
| InfraCap MLP ETF |
Ford and InfraCap MLP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and InfraCap MLP
The main advantage of trading using opposite Ford and InfraCap MLP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, InfraCap MLP 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 InfraCap MLP will offset losses from the drop in InfraCap MLP's long position.The idea behind Ford Motor and InfraCap MLP ETF 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.| InfraCap MLP vs. Virtus InfraCap Preferred | InfraCap MLP vs. Global X MLP | InfraCap MLP vs. Amplify High Income | InfraCap MLP vs. Alerian MLP ETF |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |