Correlation Between Ford and Cross Country
Can any of the company-specific risk be diversified away by investing in both Ford and Cross Country 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 Cross Country into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Cross Country Healthcare, you can compare the effects of market volatilities on Ford and Cross Country 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 Cross Country. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Cross Country.
Diversification Opportunities for Ford and Cross Country
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Cross is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cross Country Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cross Country Healthcare 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 Cross Country. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cross Country Healthcare has no effect on the direction of Ford i.e., Ford and Cross Country go up and down completely randomly.
Pair Corralation between Ford and Cross Country
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.58 times more return on investment than Cross Country. However, Ford Motor is 1.72 times less risky than Cross Country. It trades about 0.04 of its potential returns per unit of risk. Cross Country Healthcare is currently generating about -0.06 per unit of risk. If you would invest 1,122 in Ford Motor on August 28, 2024 and sell it today you would earn a total of 18.00 from holding Ford Motor or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Cross Country Healthcare
Performance |
| Timeline |
| Ford Motor |
| Cross Country Healthcare |
Ford and Cross Country Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Cross Country
The main advantage of trading using opposite Ford and Cross Country positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Cross Country 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 Cross Country will offset losses from the drop in Cross Country's long position.The idea behind Ford Motor and Cross Country Healthcare 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.| Cross Country vs. ASGN Inc | Cross Country vs. Kforce Inc | Cross Country vs. Kelly Services A | Cross Country vs. AMN Healthcare Services |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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