Correlation Between Ford and BQE Water
Can any of the company-specific risk be diversified away by investing in both Ford and BQE Water 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 BQE Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BQE Water, you can compare the effects of market volatilities on Ford and BQE Water 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 BQE Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BQE Water.
Diversification Opportunities for Ford and BQE Water
Very good diversification
The 3 months correlation between Ford and BQE is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BQE Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BQE Water 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 BQE Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BQE Water has no effect on the direction of Ford i.e., Ford and BQE Water go up and down completely randomly.
Pair Corralation between Ford and BQE Water
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.75 times more return on investment than BQE Water. However, Ford Motor is 1.34 times less risky than BQE Water. It trades about -0.01 of its potential returns per unit of risk. BQE Water is currently generating about -0.02 per unit of risk. If you would invest 1,178 in Ford Motor on August 29, 2024 and sell it today you would lose (68.00) from holding Ford Motor or give up 5.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Ford Motor vs. BQE Water
Performance |
| Timeline |
| Ford Motor |
| BQE Water |
Ford and BQE Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BQE Water
The main advantage of trading using opposite Ford and BQE Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, BQE Water 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 BQE Water will offset losses from the drop in BQE Water's long position.The idea behind Ford Motor and BQE Water 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.| BQE Water vs. Deere Company | BQE Water vs. Columbus McKinnon | BQE Water vs. Hyster Yale Materials Handling | BQE Water vs. Manitowoc |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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