Correlation Between Ford and Southern California
Can any of the company-specific risk be diversified away by investing in both Ford and Southern California 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 Southern California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Southern California Bancorp, you can compare the effects of market volatilities on Ford and Southern California 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 Southern California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Southern California.
Diversification Opportunities for Ford and Southern California
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Southern is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Southern California Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern California 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 Southern California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern California has no effect on the direction of Ford i.e., Ford and Southern California go up and down completely randomly.
Pair Corralation between Ford and Southern California
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Southern California. In addition to that, Ford is 1.35 times more volatile than Southern California Bancorp. It trades about 0.0 of its total potential returns per unit of risk. Southern California Bancorp is currently generating about 0.05 per unit of volatility. If you would invest 1,380 in Southern California Bancorp on August 31, 2024 and sell it today you would earn a total of 412.00 from holding Southern California Bancorp or generate 29.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Southern California Bancorp
Performance |
| Timeline |
| Ford Motor |
| Southern California |
Ford and Southern California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Southern California
The main advantage of trading using opposite Ford and Southern California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Southern California 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 Southern California will offset losses from the drop in Southern California's long position.The idea behind Ford Motor and Southern California Bancorp 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.| Southern California vs. Avidbank Holdings | Southern California vs. American Riviera Bank | Southern California vs. American Business Bk | Southern California vs. Private Bancorp of |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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