Correlation Between Ford and Aspen Digital
Can any of the company-specific risk be diversified away by investing in both Ford and Aspen Digital 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 Aspen Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Aspen Digital, you can compare the effects of market volatilities on Ford and Aspen Digital 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 Aspen Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Aspen Digital.
Diversification Opportunities for Ford and Aspen Digital
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Aspen is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aspen Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Digital 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 Aspen Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Digital has no effect on the direction of Ford i.e., Ford and Aspen Digital go up and down completely randomly.
Pair Corralation between Ford and Aspen Digital
Taking into account the 90-day investment horizon Ford Motor is expected to generate 3.08 times more return on investment than Aspen Digital. However, Ford is 3.08 times more volatile than Aspen Digital. It trades about 0.07 of its potential returns per unit of risk. Aspen Digital is currently generating about 0.08 per unit of risk. If you would invest 988.00 in Ford Motor on November 4, 2024 and sell it today you would earn a total of 20.00 from holding Ford Motor or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Ford Motor vs. Aspen Digital
Performance |
| Timeline |
| Ford Motor |
| Aspen Digital |
Ford and Aspen Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Aspen Digital
The main advantage of trading using opposite Ford and Aspen Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Aspen Digital 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 Aspen Digital will offset losses from the drop in Aspen Digital's long position.The idea behind Ford Motor and Aspen Digital 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.| Aspen Digital vs. tZERO Group | Aspen Digital vs. American Hotel Income | Aspen Digital vs. Allied Properties Real | Aspen Digital vs. American Films |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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