Correlation Between Ford and Balfour Beatty
Can any of the company-specific risk be diversified away by investing in both Ford and Balfour Beatty 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 Balfour Beatty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Balfour Beatty PLC, you can compare the effects of market volatilities on Ford and Balfour Beatty 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 Balfour Beatty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Balfour Beatty.
Diversification Opportunities for Ford and Balfour Beatty
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Balfour is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Balfour Beatty PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balfour Beatty PLC 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 Balfour Beatty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balfour Beatty PLC has no effect on the direction of Ford i.e., Ford and Balfour Beatty go up and down completely randomly.
Pair Corralation between Ford and Balfour Beatty
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Balfour Beatty. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.21 times less risky than Balfour Beatty. The stock trades about 0.0 of its potential returns per unit of risk. The Balfour Beatty PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 995.00 in Balfour Beatty PLC on September 2, 2024 and sell it today you would earn a total of 27.00 from holding Balfour Beatty PLC or generate 2.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 35.71% |
| Values | Daily Returns |
Ford Motor vs. Balfour Beatty PLC
Performance |
| Timeline |
| Ford Motor |
| Balfour Beatty PLC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Balfour Beatty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Balfour Beatty
The main advantage of trading using opposite Ford and Balfour Beatty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Balfour Beatty 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 Balfour Beatty will offset losses from the drop in Balfour Beatty's long position.The idea behind Ford Motor and Balfour Beatty PLC 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.| Balfour Beatty vs. ACS Actividades De | Balfour Beatty vs. Arcadis NV | Balfour Beatty vs. Badger Infrastructure Solutions | Balfour Beatty vs. Acciona SA |
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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