Correlation Between Ford and Applied Blockchain
Can any of the company-specific risk be diversified away by investing in both Ford and Applied Blockchain 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 Applied Blockchain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Applied Blockchain, you can compare the effects of market volatilities on Ford and Applied Blockchain 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 Applied Blockchain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Applied Blockchain.
Diversification Opportunities for Ford and Applied Blockchain
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Applied is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Applied Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Blockchain 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 Applied Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Blockchain has no effect on the direction of Ford i.e., Ford and Applied Blockchain go up and down completely randomly.
Pair Corralation between Ford and Applied Blockchain
Taking into account the 90-day investment horizon Ford is expected to generate 21.0 times less return on investment than Applied Blockchain. But when comparing it to its historical volatility, Ford Motor is 3.79 times less risky than Applied Blockchain. It trades about 0.01 of its potential returns per unit of risk. Applied Blockchain is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 321.00 in Applied Blockchain on August 27, 2024 and sell it today you would earn a total of 664.00 from holding Applied Blockchain or generate 206.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Applied Blockchain
Performance |
| Timeline |
| Ford Motor |
| Applied Blockchain |
Ford and Applied Blockchain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Applied Blockchain
The main advantage of trading using opposite Ford and Applied Blockchain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Applied Blockchain 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 Applied Blockchain will offset losses from the drop in Applied Blockchain's long position.The idea behind Ford Motor and Applied Blockchain 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.| Applied Blockchain vs. Magic Empire Global | Applied Blockchain vs. Zhong Yang Financial | Applied Blockchain vs. Netcapital | Applied Blockchain vs. Lazard |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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