Correlation Between Ford and Burke Herbert
Can any of the company-specific risk be diversified away by investing in both Ford and Burke Herbert 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 Burke Herbert into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Burke Herbert Financial, you can compare the effects of market volatilities on Ford and Burke Herbert 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 Burke Herbert. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Burke Herbert.
Diversification Opportunities for Ford and Burke Herbert
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Burke is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Burke Herbert Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burke Herbert Financial 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 Burke Herbert. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burke Herbert Financial has no effect on the direction of Ford i.e., Ford and Burke Herbert go up and down completely randomly.
Pair Corralation between Ford and Burke Herbert
Taking into account the 90-day investment horizon Ford is expected to generate 4.46 times less return on investment than Burke Herbert. But when comparing it to its historical volatility, Ford Motor is 1.13 times less risky than Burke Herbert. It trades about 0.01 of its potential returns per unit of risk. Burke Herbert Financial is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 6,059 in Burke Herbert Financial on August 25, 2024 and sell it today you would earn a total of 810.00 from holding Burke Herbert Financial or generate 13.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Burke Herbert Financial
Performance |
| Timeline |
| Ford Motor |
| Burke Herbert Financial |
Ford and Burke Herbert Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Burke Herbert
The main advantage of trading using opposite Ford and Burke Herbert positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Burke Herbert 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 Burke Herbert will offset losses from the drop in Burke Herbert's long position.The idea behind Ford Motor and Burke Herbert Financial 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.| Burke Herbert vs. Private Bancorp of | Burke Herbert vs. Avidbank Holdings | Burke Herbert vs. American Business Bk | Burke Herbert vs. Home Federal Bancorp |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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