Correlation Between Ford and CullenFrost Bankers
Can any of the company-specific risk be diversified away by investing in both Ford and CullenFrost Bankers 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 CullenFrost Bankers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and CullenFrost Bankers, you can compare the effects of market volatilities on Ford and CullenFrost Bankers 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 CullenFrost Bankers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and CullenFrost Bankers.
Diversification Opportunities for Ford and CullenFrost Bankers
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and CullenFrost is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and CullenFrost Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CullenFrost Bankers 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 CullenFrost Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CullenFrost Bankers has no effect on the direction of Ford i.e., Ford and CullenFrost Bankers go up and down completely randomly.
Pair Corralation between Ford and CullenFrost Bankers
Taking into account the 90-day investment horizon Ford is expected to generate 8.61 times less return on investment than CullenFrost Bankers. In addition to that, Ford is 2.19 times more volatile than CullenFrost Bankers. It trades about 0.0 of its total potential returns per unit of risk. CullenFrost Bankers is currently generating about 0.04 per unit of volatility. If you would invest 1,702 in CullenFrost Bankers on August 26, 2024 and sell it today you would earn a total of 250.00 from holding CullenFrost Bankers or generate 14.69% 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. CullenFrost Bankers
Performance |
| Timeline |
| Ford Motor |
| CullenFrost Bankers |
Ford and CullenFrost Bankers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and CullenFrost Bankers
The main advantage of trading using opposite Ford and CullenFrost Bankers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, CullenFrost Bankers 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 CullenFrost Bankers will offset losses from the drop in CullenFrost Bankers' long position.The idea behind Ford Motor and CullenFrost Bankers 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.| CullenFrost Bankers vs. Morgan Stanley | CullenFrost Bankers vs. KeyCorp | CullenFrost Bankers vs. KeyCorp | CullenFrost Bankers vs. KeyCorp |
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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