Correlation Between Ford and Eclectic Bar
Can any of the company-specific risk be diversified away by investing in both Ford and Eclectic Bar 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 Eclectic Bar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Eclectic Bar Group, you can compare the effects of market volatilities on Ford and Eclectic Bar 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 Eclectic Bar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Eclectic Bar.
Diversification Opportunities for Ford and Eclectic Bar
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and Eclectic is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Eclectic Bar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eclectic Bar Group 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 Eclectic Bar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eclectic Bar Group has no effect on the direction of Ford i.e., Ford and Eclectic Bar go up and down completely randomly.
Pair Corralation between Ford and Eclectic Bar
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Eclectic Bar. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 15.11 times less risky than Eclectic Bar. The stock trades about -0.48 of its potential returns per unit of risk. The Eclectic Bar Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,200 in Eclectic Bar Group on September 24, 2024 and sell it today you would earn a total of 2,500 from holding Eclectic Bar Group or generate 113.64% 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. Eclectic Bar Group
Performance |
| Timeline |
| Ford Motor |
| Eclectic Bar Group |
Ford and Eclectic Bar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Eclectic Bar
The main advantage of trading using opposite Ford and Eclectic Bar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Eclectic Bar 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 Eclectic Bar will offset losses from the drop in Eclectic Bar's long position.The idea behind Ford Motor and Eclectic Bar Group 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.| Eclectic Bar vs. Toyota Motor Corp | Eclectic Bar vs. SoftBank Group Corp | Eclectic Bar vs. OTP Bank Nyrt | Eclectic Bar vs. Newmont Corp |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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