Correlation Between Ford and Ark Restaurants
Can any of the company-specific risk be diversified away by investing in both Ford and Ark Restaurants 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 Ark Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Ark Restaurants Corp, you can compare the effects of market volatilities on Ford and Ark Restaurants 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 Ark Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Ark Restaurants.
Diversification Opportunities for Ford and Ark Restaurants
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and Ark is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Ark Restaurants Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ark Restaurants Corp 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 Ark Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ark Restaurants Corp has no effect on the direction of Ford i.e., Ford and Ark Restaurants go up and down completely randomly.
Pair Corralation between Ford and Ark Restaurants
Taking into account the 90-day investment horizon Ford is expected to generate 1.46 times less return on investment than Ark Restaurants. But when comparing it to its historical volatility, Ford Motor is 3.11 times less risky than Ark Restaurants. It trades about 0.14 of its potential returns per unit of risk. Ark Restaurants Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,276 in Ark Restaurants Corp on November 3, 2024 and sell it today you would earn a total of 55.00 from holding Ark Restaurants Corp or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Ark Restaurants Corp
Performance |
| Timeline |
| Ford Motor |
| Ark Restaurants Corp |
Ford and Ark Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Ark Restaurants
The main advantage of trading using opposite Ford and Ark Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Ark Restaurants 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 Ark Restaurants will offset losses from the drop in Ark Restaurants' long position.The idea behind Ford Motor and Ark Restaurants Corp 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.| Ark Restaurants vs. Nathans Famous | Ark Restaurants vs. Flanigans Enterprises | Ark Restaurants vs. Good Times Restaurants | Ark Restaurants vs. Auburn National Bancorporation |
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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