Correlation Between Ford and Metro AG
Can any of the company-specific risk be diversified away by investing in both Ford and Metro AG 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 Metro AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Metro AG, you can compare the effects of market volatilities on Ford and Metro AG 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 Metro AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Metro AG.
Diversification Opportunities for Ford and Metro AG
Average diversification
The 3 months correlation between Ford and Metro is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG 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 Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of Ford i.e., Ford and Metro AG go up and down completely randomly.
Pair Corralation between Ford and Metro AG
Taking into account the 90-day investment horizon Ford is expected to generate 1.54 times less return on investment than Metro AG. But when comparing it to its historical volatility, Ford Motor is 1.49 times less risky than Metro AG. It trades about 0.02 of its potential returns per unit of risk. Metro AG is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 492.00 in Metro AG on September 12, 2024 and sell it today you would earn a total of 2.00 from holding Metro AG or generate 0.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Ford Motor vs. Metro AG
Performance |
| Timeline |
| Ford Motor |
| Metro AG |
Ford and Metro AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Metro AG
The main advantage of trading using opposite Ford and Metro AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Metro AG 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 Metro AG will offset losses from the drop in Metro AG's long position.The idea behind Ford Motor and Metro AG 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.| Metro AG vs. Superior Plus Corp | Metro AG vs. SIVERS SEMICONDUCTORS AB | Metro AG vs. NorAm Drilling AS | Metro AG vs. BANK HANDLOWY |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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