Correlation Between Ford and Altair International
Can any of the company-specific risk be diversified away by investing in both Ford and Altair International 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 Altair International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Altair International Corp, you can compare the effects of market volatilities on Ford and Altair International 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 Altair International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Altair International.
Diversification Opportunities for Ford and Altair International
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Altair is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Altair International Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair International 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 Altair International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altair International Corp has no effect on the direction of Ford i.e., Ford and Altair International go up and down completely randomly.
Pair Corralation between Ford and Altair International
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.15 times more return on investment than Altair International. However, Ford Motor is 6.75 times less risky than Altair International. It trades about 0.23 of its potential returns per unit of risk. Altair International Corp is currently generating about 0.02 per unit of risk. If you would invest 1,015 in Ford Motor on September 1, 2024 and sell it today you would earn a total of 98.00 from holding Ford Motor or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Altair International Corp
Performance |
| Timeline |
| Ford Motor |
| Altair International Corp |
Ford and Altair International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Altair International
The main advantage of trading using opposite Ford and Altair International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Altair International 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 Altair International will offset losses from the drop in Altair International's long position.The idea behind Ford Motor and Altair International 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.| Altair International vs. ATT Inc | Altair International vs. Merck Company | Altair International vs. Walt Disney | Altair International vs. Caterpillar |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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