Correlation Between Ford and Salomon A
Can any of the company-specific risk be diversified away by investing in both Ford and Salomon A 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 Salomon A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Salomon A Angel, you can compare the effects of market volatilities on Ford and Salomon A 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 Salomon A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Salomon A.
Diversification Opportunities for Ford and Salomon A
Very good diversification
The 3 months correlation between Ford and Salomon is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Salomon A Angel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salomon A Angel 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 Salomon A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salomon A Angel has no effect on the direction of Ford i.e., Ford and Salomon A go up and down completely randomly.
Pair Corralation between Ford and Salomon A
Taking into account the 90-day investment horizon Ford is expected to generate 19.78 times less return on investment than Salomon A. But when comparing it to its historical volatility, Ford Motor is 1.02 times less risky than Salomon A. It trades about 0.01 of its potential returns per unit of risk. Salomon A Angel is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 310,000 in Salomon A Angel on August 27, 2024 and sell it today you would earn a total of 18,400 from holding Salomon A Angel or generate 5.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 80.95% |
| Values | Daily Returns |
Ford Motor vs. Salomon A Angel
Performance |
| Timeline |
| Ford Motor |
| Salomon A Angel |
Ford and Salomon A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Salomon A
The main advantage of trading using opposite Ford and Salomon A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Salomon A 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 Salomon A will offset losses from the drop in Salomon A's long position.The idea behind Ford Motor and Salomon A Angel 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.| Salomon A vs. Zanlakol | Salomon A vs. Gan Shmuel | Salomon A vs. Carmit | Salomon A vs. Sano Brunos Enterprises |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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