Correlation Between Ford and Aritzia
Can any of the company-specific risk be diversified away by investing in both Ford and Aritzia 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 Aritzia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Aritzia, you can compare the effects of market volatilities on Ford and Aritzia 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 Aritzia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Aritzia.
Diversification Opportunities for Ford and Aritzia
Very good diversification
The 3 months correlation between Ford and Aritzia is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aritzia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aritzia 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 Aritzia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aritzia has no effect on the direction of Ford i.e., Ford and Aritzia go up and down completely randomly.
Pair Corralation between Ford and Aritzia
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Aritzia. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.53 times less risky than Aritzia. The stock trades about 0.0 of its potential returns per unit of risk. The Aritzia is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,600 in Aritzia on September 2, 2024 and sell it today you would earn a total of 735.00 from holding Aritzia or generate 28.27% 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. Aritzia
Performance |
| Timeline |
| Ford Motor |
| Aritzia |
Ford and Aritzia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Aritzia
The main advantage of trading using opposite Ford and Aritzia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Aritzia 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 Aritzia will offset losses from the drop in Aritzia's long position.The idea behind Ford Motor and Aritzia 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.| Aritzia vs. Fast Retailing Co | Aritzia vs. Industria de Diseno | Aritzia vs. Shoe Carnival | Aritzia vs. Genesco |
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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