Correlation Between Ford and BKI Investment
Can any of the company-specific risk be diversified away by investing in both Ford and BKI Investment 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 BKI Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BKI Investment, you can compare the effects of market volatilities on Ford and BKI Investment 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 BKI Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BKI Investment.
Diversification Opportunities for Ford and BKI Investment
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and BKI is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BKI Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKI Investment 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 BKI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BKI Investment has no effect on the direction of Ford i.e., Ford and BKI Investment go up and down completely randomly.
Pair Corralation between Ford and BKI Investment
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the BKI Investment. In addition to that, Ford is 3.2 times more volatile than BKI Investment. It trades about -0.01 of its total potential returns per unit of risk. BKI Investment is currently generating about 0.04 per unit of volatility. If you would invest 165.00 in BKI Investment on August 31, 2024 and sell it today you would earn a total of 7.00 from holding BKI Investment or generate 4.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.45% |
| Values | Daily Returns |
Ford Motor vs. BKI Investment
Performance |
| Timeline |
| Ford Motor |
| BKI Investment |
Ford and BKI Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BKI Investment
The main advantage of trading using opposite Ford and BKI Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, BKI Investment 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 BKI Investment will offset losses from the drop in BKI Investment's long position.The idea behind Ford Motor and BKI Investment 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.| BKI Investment vs. Ainsworth Game Technology | BKI Investment vs. My Foodie Box | BKI Investment vs. Advanced Braking Technology | BKI Investment vs. Beston Global Food |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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