Correlation Between Ford and BDO Unibank
Can any of the company-specific risk be diversified away by investing in both Ford and BDO Unibank 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 BDO Unibank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BDO Unibank ADR, you can compare the effects of market volatilities on Ford and BDO Unibank 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 BDO Unibank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BDO Unibank.
Diversification Opportunities for Ford and BDO Unibank
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and BDO is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BDO Unibank ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BDO Unibank ADR 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 BDO Unibank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BDO Unibank ADR has no effect on the direction of Ford i.e., Ford and BDO Unibank go up and down completely randomly.
Pair Corralation between Ford and BDO Unibank
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.09 times more return on investment than BDO Unibank. However, Ford is 1.09 times more volatile than BDO Unibank ADR. It trades about 0.04 of its potential returns per unit of risk. BDO Unibank ADR is currently generating about -0.18 per unit of risk. If you would invest 1,122 in Ford Motor on August 27, 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 Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. BDO Unibank ADR
Performance |
| Timeline |
| Ford Motor |
| BDO Unibank ADR |
Ford and BDO Unibank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BDO Unibank
The main advantage of trading using opposite Ford and BDO Unibank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, BDO Unibank 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 BDO Unibank will offset losses from the drop in BDO Unibank's long position.The idea behind Ford Motor and BDO Unibank ADR 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.| BDO Unibank vs. Swedbank AB | BDO Unibank vs. United Overseas Bank | BDO Unibank vs. KBC Groep NV | BDO Unibank vs. Jyske Bank AS |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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