Correlation Between Ford and Brandes Emerging
Can any of the company-specific risk be diversified away by investing in both Ford and Brandes Emerging 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 Brandes Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Brandes Emerging Markets, you can compare the effects of market volatilities on Ford and Brandes Emerging 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 Brandes Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Brandes Emerging.
Diversification Opportunities for Ford and Brandes Emerging
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Brandes is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Brandes Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandes Emerging Markets 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 Brandes Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandes Emerging Markets has no effect on the direction of Ford i.e., Ford and Brandes Emerging go up and down completely randomly.
Pair Corralation between Ford and Brandes Emerging
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.08 times more return on investment than Brandes Emerging. However, Ford is 2.08 times more volatile than Brandes Emerging Markets. It trades about 0.16 of its potential returns per unit of risk. Brandes Emerging Markets is currently generating about 0.23 per unit of risk. If you would invest 965.00 in Ford Motor on November 2, 2024 and sell it today you would earn a total of 51.00 from holding Ford Motor or generate 5.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Ford Motor vs. Brandes Emerging Markets
Performance |
| Timeline |
| Ford Motor |
| Brandes Emerging Markets |
Ford and Brandes Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Brandes Emerging
The main advantage of trading using opposite Ford and Brandes Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Brandes Emerging 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 Brandes Emerging will offset losses from the drop in Brandes Emerging's long position.The idea behind Ford Motor and Brandes Emerging Markets 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.| Brandes Emerging vs. Brandes Small Cap | Brandes Emerging vs. Brandes Small Cap | Brandes Emerging vs. Brandes Small Cap | Brandes Emerging vs. Brandes E Plus |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |