Correlation Between Ford and Anheuser Busch
Can any of the company-specific risk be diversified away by investing in both Ford and Anheuser Busch 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 Anheuser Busch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Anheuser Busch Inbev, you can compare the effects of market volatilities on Ford and Anheuser Busch 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 Anheuser Busch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Anheuser Busch.
Diversification Opportunities for Ford and Anheuser Busch
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Anheuser is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Anheuser Busch Inbev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch Inbev 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 Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch Inbev has no effect on the direction of Ford i.e., Ford and Anheuser Busch go up and down completely randomly.
Pair Corralation between Ford and Anheuser Busch
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.77 times more return on investment than Anheuser Busch. However, Ford is 1.77 times more volatile than Anheuser Busch Inbev. It trades about 0.01 of its potential returns per unit of risk. Anheuser Busch Inbev is currently generating about 0.0 per unit of risk. If you would invest 1,123 in Ford Motor on August 27, 2024 and sell it today you would lose (5.00) from holding Ford Motor or give up 0.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Anheuser Busch Inbev
Performance |
| Timeline |
| Ford Motor |
| Anheuser Busch Inbev |
Ford and Anheuser Busch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Anheuser Busch
The main advantage of trading using opposite Ford and Anheuser Busch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Anheuser Busch 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 Anheuser Busch will offset losses from the drop in Anheuser Busch's long position.The idea behind Ford Motor and Anheuser Busch Inbev 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.| Anheuser Busch vs. Boston Beer | Anheuser Busch vs. Molson Coors Beverage | Anheuser Busch vs. Heineken NV | Anheuser Busch vs. Ambev SA ADR |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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