Correlation Between Ford and Ab Select
Can any of the company-specific risk be diversified away by investing in both Ford and Ab Select 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 Ab Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Ab Select Longshort, you can compare the effects of market volatilities on Ford and Ab Select 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 Ab Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Ab Select.
Diversification Opportunities for Ford and Ab Select
Modest diversification
The 3 months correlation between Ford and ASRLX is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Ab Select Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Select Longshort 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 Ab Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Select Longshort has no effect on the direction of Ford i.e., Ford and Ab Select go up and down completely randomly.
Pair Corralation between Ford and Ab Select
Taking into account the 90-day investment horizon Ford is expected to generate 2.42 times less return on investment than Ab Select. In addition to that, Ford is 5.67 times more volatile than Ab Select Longshort. It trades about 0.01 of its total potential returns per unit of risk. Ab Select Longshort is currently generating about 0.16 per unit of volatility. If you would invest 1,209 in Ab Select Longshort on August 29, 2024 and sell it today you would earn a total of 159.00 from holding Ab Select Longshort or generate 13.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 61.22% |
| Values | Daily Returns |
Ford Motor vs. Ab Select Longshort
Performance |
| Timeline |
| Ford Motor |
| Ab Select Longshort |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Ab Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Ab Select
The main advantage of trading using opposite Ford and Ab Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Ab Select 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 Ab Select will offset losses from the drop in Ab Select's long position.The idea behind Ford Motor and Ab Select Longshort 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.| Ab Select vs. Delaware Limited Term Diversified | Ab Select vs. Pimco Diversified Income | Ab Select vs. American Funds Conservative | Ab Select vs. Adams Diversified Equity |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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