Correlation Between Ford and Brisa Bridgestone
Can any of the company-specific risk be diversified away by investing in both Ford and Brisa Bridgestone 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 Brisa Bridgestone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Brisa Bridgestone Sabanci, you can compare the effects of market volatilities on Ford and Brisa Bridgestone 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 Brisa Bridgestone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Brisa Bridgestone.
Diversification Opportunities for Ford and Brisa Bridgestone
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Brisa is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Brisa Bridgestone Sabanci in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brisa Bridgestone Sabanci 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 Brisa Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brisa Bridgestone Sabanci has no effect on the direction of Ford i.e., Ford and Brisa Bridgestone go up and down completely randomly.
Pair Corralation between Ford and Brisa Bridgestone
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.05 times more return on investment than Brisa Bridgestone. However, Ford is 1.05 times more volatile than Brisa Bridgestone Sabanci. It trades about -0.01 of its potential returns per unit of risk. Brisa Bridgestone Sabanci is currently generating about -0.04 per unit of risk. If you would invest 1,184 in Ford Motor on August 31, 2024 and sell it today you would lose (71.00) from holding Ford Motor or give up 6.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.64% |
| Values | Daily Returns |
Ford Motor vs. Brisa Bridgestone Sabanci
Performance |
| Timeline |
| Ford Motor |
| Brisa Bridgestone Sabanci |
Ford and Brisa Bridgestone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Brisa Bridgestone
The main advantage of trading using opposite Ford and Brisa Bridgestone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Brisa Bridgestone 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 Brisa Bridgestone will offset losses from the drop in Brisa Bridgestone's long position.The idea behind Ford Motor and Brisa Bridgestone Sabanci 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.| Brisa Bridgestone vs. Aksa Akrilik Kimya | Brisa Bridgestone vs. Kordsa Global Endustriyel | Brisa Bridgestone vs. Tofas Turk Otomobil | Brisa Bridgestone vs. Arcelik AS |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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