Correlation Between Ford and Acuity Brands
Can any of the company-specific risk be diversified away by investing in both Ford and Acuity Brands 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 Acuity Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Acuity Brands, you can compare the effects of market volatilities on Ford and Acuity Brands 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 Acuity Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Acuity Brands.
Diversification Opportunities for Ford and Acuity Brands
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Acuity is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Acuity Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acuity Brands 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 Acuity Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acuity Brands has no effect on the direction of Ford i.e., Ford and Acuity Brands go up and down completely randomly.
Pair Corralation between Ford and Acuity Brands
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.54 times more return on investment than Acuity Brands. However, Ford is 1.54 times more volatile than Acuity Brands. It trades about 0.17 of its potential returns per unit of risk. Acuity Brands is currently generating about 0.21 per unit of risk. If you would invest 1,033 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 77.00 from holding Ford Motor or generate 7.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Acuity Brands
Performance |
| Timeline |
| Ford Motor |
| Acuity Brands |
Ford and Acuity Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Acuity Brands
The main advantage of trading using opposite Ford and Acuity Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Acuity Brands 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 Acuity Brands will offset losses from the drop in Acuity Brands' long position.The idea behind Ford Motor and Acuity Brands 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.| Acuity Brands vs. Energizer Holdings | Acuity Brands vs. Espey Mfg Electronics | Acuity Brands vs. Preformed Line Products | Acuity Brands vs. nVent Electric PLC |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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