Correlation Between Ford and Brunswick Exploration
Can any of the company-specific risk be diversified away by investing in both Ford and Brunswick Exploration 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 Brunswick Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Brunswick Exploration, you can compare the effects of market volatilities on Ford and Brunswick Exploration 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 Brunswick Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Brunswick Exploration.
Diversification Opportunities for Ford and Brunswick Exploration
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Brunswick is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Brunswick Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunswick Exploration 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 Brunswick Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunswick Exploration has no effect on the direction of Ford i.e., Ford and Brunswick Exploration go up and down completely randomly.
Pair Corralation between Ford and Brunswick Exploration
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.55 times more return on investment than Brunswick Exploration. However, Ford Motor is 1.81 times less risky than Brunswick Exploration. It trades about 0.0 of its potential returns per unit of risk. Brunswick Exploration is currently generating about -0.29 per unit of risk. If you would invest 1,122 in Ford Motor on August 29, 2024 and sell it today you would lose (12.00) from holding Ford Motor or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Brunswick Exploration
Performance |
| Timeline |
| Ford Motor |
| Brunswick Exploration |
Ford and Brunswick Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Brunswick Exploration
The main advantage of trading using opposite Ford and Brunswick Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Brunswick Exploration 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 Brunswick Exploration will offset losses from the drop in Brunswick Exploration's long position.The idea behind Ford Motor and Brunswick Exploration 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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