Correlation Between Ford and Biotechnology Assets
Can any of the company-specific risk be diversified away by investing in both Ford and Biotechnology Assets 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 Biotechnology Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Biotechnology Assets SA, you can compare the effects of market volatilities on Ford and Biotechnology Assets 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 Biotechnology Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Biotechnology Assets.
Diversification Opportunities for Ford and Biotechnology Assets
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and Biotechnology is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Biotechnology Assets SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotechnology Assets 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 Biotechnology Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotechnology Assets has no effect on the direction of Ford i.e., Ford and Biotechnology Assets go up and down completely randomly.
Pair Corralation between Ford and Biotechnology Assets
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Biotechnology Assets. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.56 times less risky than Biotechnology Assets. The stock trades about -0.01 of its potential returns per unit of risk. The Biotechnology Assets SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 41.00 in Biotechnology Assets SA on August 28, 2024 and sell it today you would lose (7.00) from holding Biotechnology Assets SA or give up 17.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.61% |
| Values | Daily Returns |
Ford Motor vs. Biotechnology Assets SA
Performance |
| Timeline |
| Ford Motor |
| Biotechnology Assets |
Ford and Biotechnology Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Biotechnology Assets
The main advantage of trading using opposite Ford and Biotechnology Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Biotechnology Assets 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 Biotechnology Assets will offset losses from the drop in Biotechnology Assets' long position.The idea behind Ford Motor and Biotechnology Assets SA 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.| Biotechnology Assets vs. Laboratorios Farmaceuticos ROVI | Biotechnology Assets vs. Atrys Health SL | Biotechnology Assets vs. Oryzon Genomics SA |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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