Correlation Between Ford and ABSA BANK
Can any of the company-specific risk be diversified away by investing in both Ford and ABSA BANK 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 ABSA BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and ABSA BANK OF, you can compare the effects of market volatilities on Ford and ABSA BANK 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 ABSA BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and ABSA BANK.
Diversification Opportunities for Ford and ABSA BANK
Weak diversification
The 3 months correlation between Ford and ABSA is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ABSA BANK OF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABSA BANK 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 ABSA BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABSA BANK has no effect on the direction of Ford i.e., Ford and ABSA BANK go up and down completely randomly.
Pair Corralation between Ford and ABSA BANK
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.38 times more return on investment than ABSA BANK. However, Ford is 2.38 times more volatile than ABSA BANK OF. It trades about 0.04 of its potential returns per unit of risk. ABSA BANK OF is currently generating about 0.03 per unit of risk. If you would invest 1,122 in Ford Motor on August 28, 2024 and sell it today you would earn a total of 18.00 from holding Ford Motor or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Ford Motor vs. ABSA BANK OF
Performance |
| Timeline |
| Ford Motor |
| ABSA BANK |
Ford and ABSA BANK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and ABSA BANK
The main advantage of trading using opposite Ford and ABSA BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, ABSA BANK 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 ABSA BANK will offset losses from the drop in ABSA BANK's long position.The idea behind Ford Motor and ABSA BANK OF 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.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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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