Correlation Between Ford and BJC Heavy
Can any of the company-specific risk be diversified away by investing in both Ford and BJC Heavy 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 BJC Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BJC Heavy Industries, you can compare the effects of market volatilities on Ford and BJC Heavy 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 BJC Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BJC Heavy.
Diversification Opportunities for Ford and BJC Heavy
Good diversification
The 3 months correlation between Ford and BJC is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BJC Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJC Heavy Industries 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 BJC Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJC Heavy Industries has no effect on the direction of Ford i.e., Ford and BJC Heavy go up and down completely randomly.
Pair Corralation between Ford and BJC Heavy
Taking into account the 90-day investment horizon Ford is expected to generate 69.87 times less return on investment than BJC Heavy. But when comparing it to its historical volatility, Ford Motor is 19.92 times less risky than BJC Heavy. It trades about 0.01 of its potential returns per unit of risk. BJC Heavy Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 155.00 in BJC Heavy Industries on August 30, 2024 and sell it today you would lose (35.00) from holding BJC Heavy Industries or give up 22.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.17% |
| Values | Daily Returns |
Ford Motor vs. BJC Heavy Industries
Performance |
| Timeline |
| Ford Motor |
| BJC Heavy Industries |
Ford and BJC Heavy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BJC Heavy
The main advantage of trading using opposite Ford and BJC Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, BJC Heavy 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 BJC Heavy will offset losses from the drop in BJC Heavy's long position.The idea behind Ford Motor and BJC Heavy Industries 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.| BJC Heavy vs. CH Karnchang Public | BJC Heavy vs. Asia Aviation Public | BJC Heavy vs. AAPICO Hitech Public | BJC Heavy vs. GFPT Public |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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