Correlation Between Ford and BRB Banco
Can any of the company-specific risk be diversified away by investing in both Ford and BRB Banco 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 BRB Banco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BRB Banco, you can compare the effects of market volatilities on Ford and BRB Banco 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 BRB Banco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BRB Banco.
Diversification Opportunities for Ford and BRB Banco
Excellent diversification
The 3 months correlation between Ford and BRB is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BRB Banco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRB Banco 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 BRB Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRB Banco has no effect on the direction of Ford i.e., Ford and BRB Banco go up and down completely randomly.
Pair Corralation between Ford and BRB Banco
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.59 times more return on investment than BRB Banco. However, Ford Motor is 1.69 times less risky than BRB Banco. It trades about 0.03 of its potential returns per unit of risk. BRB Banco is currently generating about -0.07 per unit of risk. If you would invest 1,083 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 27.00 from holding Ford Motor or generate 2.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Ford Motor vs. BRB Banco
Performance |
| Timeline |
| Ford Motor |
| BRB Banco |
Ford and BRB Banco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BRB Banco
The main advantage of trading using opposite Ford and BRB Banco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, BRB Banco 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 BRB Banco will offset losses from the drop in BRB Banco's long position.The idea behind Ford Motor and BRB Banco 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.| BRB Banco vs. BRB Banco de | BRB Banco vs. Banco do Nordeste | BRB Banco vs. Banco do Estado | BRB Banco vs. Banco Mercantil do |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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