Correlation Between Ford and Baran
Can any of the company-specific risk be diversified away by investing in both Ford and Baran 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 Baran into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Baran Group, you can compare the effects of market volatilities on Ford and Baran 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 Baran. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Baran.
Diversification Opportunities for Ford and Baran
Very weak diversification
The 3 months correlation between Ford and Baran is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Baran Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baran Group 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 Baran. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baran Group has no effect on the direction of Ford i.e., Ford and Baran go up and down completely randomly.
Pair Corralation between Ford and Baran
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Baran. In addition to that, Ford is 1.23 times more volatile than Baran Group. It trades about 0.0 of its total potential returns per unit of risk. Baran Group is currently generating about 0.31 per unit of volatility. If you would invest 132,300 in Baran Group on August 28, 2024 and sell it today you would earn a total of 16,700 from holding Baran Group or generate 12.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 81.82% |
| Values | Daily Returns |
Ford Motor vs. Baran Group
Performance |
| Timeline |
| Ford Motor |
| Baran Group |
Ford and Baran Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Baran
The main advantage of trading using opposite Ford and Baran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Baran 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 Baran will offset losses from the drop in Baran's long position.The idea behind Ford Motor and Baran Group 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.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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