Correlation Between Ford and Amazon CDR
Can any of the company-specific risk be diversified away by investing in both Ford and Amazon CDR 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 Amazon CDR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Amazon CDR, you can compare the effects of market volatilities on Ford and Amazon CDR 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 Amazon CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Amazon CDR.
Diversification Opportunities for Ford and Amazon CDR
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Amazon is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Amazon CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon CDR 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 Amazon CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon CDR has no effect on the direction of Ford i.e., Ford and Amazon CDR go up and down completely randomly.
Pair Corralation between Ford and Amazon CDR
Taking into account the 90-day investment horizon Ford is expected to generate 6.89 times less return on investment than Amazon CDR. In addition to that, Ford is 1.19 times more volatile than Amazon CDR. It trades about 0.01 of its total potential returns per unit of risk. Amazon CDR is currently generating about 0.09 per unit of volatility. If you would invest 1,119 in Amazon CDR on August 24, 2024 and sell it today you would earn a total of 1,232 from holding Amazon CDR or generate 110.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Ford Motor vs. Amazon CDR
Performance |
| Timeline |
| Ford Motor |
| Amazon CDR |
Ford and Amazon CDR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Amazon CDR
The main advantage of trading using opposite Ford and Amazon CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Amazon CDR 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 Amazon CDR will offset losses from the drop in Amazon CDR's long position.The idea behind Ford Motor and Amazon CDR 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.| Amazon CDR vs. Quorum Information Technologies | Amazon CDR vs. Quisitive Technology Solutions | Amazon CDR vs. Canadian Utilities Limited | Amazon CDR vs. Information Services |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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