Correlation Between Ford and Deutsche Equity
Can any of the company-specific risk be diversified away by investing in both Ford and Deutsche Equity 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 Deutsche Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Deutsche Equity 500, you can compare the effects of market volatilities on Ford and Deutsche Equity 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 Deutsche Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Deutsche Equity.
Diversification Opportunities for Ford and Deutsche Equity
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Deutsche is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Deutsche Equity 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Equity 500 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 Deutsche Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Equity 500 has no effect on the direction of Ford i.e., Ford and Deutsche Equity go up and down completely randomly.
Pair Corralation between Ford and Deutsche Equity
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Deutsche Equity. In addition to that, Ford is 3.01 times more volatile than Deutsche Equity 500. It trades about -0.01 of its total potential returns per unit of risk. Deutsche Equity 500 is currently generating about 0.13 per unit of volatility. If you would invest 16,481 in Deutsche Equity 500 on August 29, 2024 and sell it today you would earn a total of 2,355 from holding Deutsche Equity 500 or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Deutsche Equity 500
Performance |
| Timeline |
| Ford Motor |
| Deutsche Equity 500 |
Ford and Deutsche Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Deutsche Equity
The main advantage of trading using opposite Ford and Deutsche Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Deutsche Equity 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 Deutsche Equity will offset losses from the drop in Deutsche Equity's long position.The idea behind Ford Motor and Deutsche Equity 500 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.| Deutsche Equity vs. The Hartford Equity | Deutsche Equity vs. Dreyfusstandish Global Fixed | Deutsche Equity vs. Balanced Fund Retail | Deutsche Equity vs. Touchstone International Equity |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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