Correlation Between Ford and BCAP Mid
Can any of the company-specific risk be diversified away by investing in both Ford and BCAP Mid 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 BCAP Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BCAP Mid Small, you can compare the effects of market volatilities on Ford and BCAP Mid 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 BCAP Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BCAP Mid.
Diversification Opportunities for Ford and BCAP Mid
Very good diversification
The 3 months correlation between Ford and BCAP is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BCAP Mid Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCAP Mid Small 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 BCAP Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCAP Mid Small has no effect on the direction of Ford i.e., Ford and BCAP Mid go up and down completely randomly.
Pair Corralation between Ford and BCAP Mid
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.94 times more return on investment than BCAP Mid. However, Ford is 2.94 times more volatile than BCAP Mid Small. It trades about 0.23 of its potential returns per unit of risk. BCAP Mid Small is currently generating about -0.45 per unit of risk. If you would invest 1,015 in Ford Motor on September 1, 2024 and sell it today you would earn a total of 98.00 from holding Ford Motor or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Ford Motor vs. BCAP Mid Small
Performance |
| Timeline |
| Ford Motor |
| BCAP Mid Small |
Ford and BCAP Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BCAP Mid
The main advantage of trading using opposite Ford and BCAP Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, BCAP Mid 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 BCAP Mid will offset losses from the drop in BCAP Mid's long position.The idea behind Ford Motor and BCAP Mid Small 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.| BCAP Mid vs. BCAP SET100 | BCAP Mid vs. BCAP MSCI Thailand | BCAP Mid vs. United Hero ETF | BCAP Mid vs. WISE KTAM CSI |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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