Correlation Between Ford and Campine
Can any of the company-specific risk be diversified away by investing in both Ford and Campine 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 Campine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Campine, you can compare the effects of market volatilities on Ford and Campine 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 Campine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Campine.
Diversification Opportunities for Ford and Campine
Modest diversification
The 3 months correlation between Ford and Campine is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Campine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Campine 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 Campine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Campine has no effect on the direction of Ford i.e., Ford and Campine go up and down completely randomly.
Pair Corralation between Ford and Campine
Taking into account the 90-day investment horizon Ford is expected to generate 3.32 times less return on investment than Campine. In addition to that, Ford is 2.24 times more volatile than Campine. It trades about 0.01 of its total potential returns per unit of risk. Campine is currently generating about 0.05 per unit of volatility. If you would invest 8,450 in Campine on August 27, 2024 and sell it today you would earn a total of 100.00 from holding Campine or generate 1.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Campine
Performance |
| Timeline |
| Ford Motor |
| Campine |
Ford and Campine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Campine
The main advantage of trading using opposite Ford and Campine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Campine 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 Campine will offset losses from the drop in Campine's long position.The idea behind Ford Motor and Campine 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.| Campine vs. Ackermans Van Haaren | Campine vs. NV Bekaert SA | Campine vs. Groep Brussel Lambert | Campine vs. Tubize Fin |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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