Correlation Between Ford and CEC AFRICA
Can any of the company-specific risk be diversified away by investing in both Ford and CEC AFRICA 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 CEC AFRICA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and CEC AFRICA INVESTMENTS, you can compare the effects of market volatilities on Ford and CEC AFRICA 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 CEC AFRICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and CEC AFRICA.
Diversification Opportunities for Ford and CEC AFRICA
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and CEC is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and CEC AFRICA INVESTMENTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEC AFRICA INVESTMENTS 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 CEC AFRICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEC AFRICA INVESTMENTS has no effect on the direction of Ford i.e., Ford and CEC AFRICA go up and down completely randomly.
Pair Corralation between Ford and CEC AFRICA
Taking into account the 90-day investment horizon Ford Motor is expected to generate 6.11 times more return on investment than CEC AFRICA. However, Ford is 6.11 times more volatile than CEC AFRICA INVESTMENTS. It trades about 0.17 of its potential returns per unit of risk. CEC AFRICA INVESTMENTS is currently generating about -0.21 per unit of risk. If you would invest 1,033 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 77.00 from holding Ford Motor or generate 7.45% 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. CEC AFRICA INVESTMENTS
Performance |
| Timeline |
| Ford Motor |
| CEC AFRICA INVESTMENTS |
Ford and CEC AFRICA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and CEC AFRICA
The main advantage of trading using opposite Ford and CEC AFRICA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, CEC AFRICA 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 CEC AFRICA will offset losses from the drop in CEC AFRICA's long position.The idea behind Ford Motor and CEC AFRICA INVESTMENTS 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.| CEC AFRICA vs. STANDARD CHARTERED BANK | CEC AFRICA vs. AECI MINING EXPLOSIVES | CEC AFRICA vs. ZAMBIA SUGAR PLC | CEC AFRICA vs. BRITISH AMERICAN TOBACCO ZAMBIA |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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