Correlation Between Ford and CAPITAL ONE
Can any of the company-specific risk be diversified away by investing in both Ford and CAPITAL ONE 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 CAPITAL ONE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and CAPITAL ONE FIN, you can compare the effects of market volatilities on Ford and CAPITAL ONE 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 CAPITAL ONE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and CAPITAL ONE.
Diversification Opportunities for Ford and CAPITAL ONE
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and CAPITAL is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and CAPITAL ONE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAPITAL ONE FIN 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 CAPITAL ONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAPITAL ONE FIN has no effect on the direction of Ford i.e., Ford and CAPITAL ONE go up and down completely randomly.
Pair Corralation between Ford and CAPITAL ONE
Taking into account the 90-day investment horizon Ford is expected to generate 2.83 times less return on investment than CAPITAL ONE. In addition to that, Ford is 1.7 times more volatile than CAPITAL ONE FIN. It trades about 0.01 of its total potential returns per unit of risk. CAPITAL ONE FIN is currently generating about 0.04 per unit of volatility. If you would invest 1,455 in CAPITAL ONE FIN on September 3, 2024 and sell it today you would earn a total of 345.00 from holding CAPITAL ONE FIN or generate 23.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.02% |
| Values | Daily Returns |
Ford Motor vs. CAPITAL ONE FIN
Performance |
| Timeline |
| Ford Motor |
| CAPITAL ONE FIN |
Ford and CAPITAL ONE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and CAPITAL ONE
The main advantage of trading using opposite Ford and CAPITAL ONE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, CAPITAL ONE 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 CAPITAL ONE will offset losses from the drop in CAPITAL ONE's long position.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. Ford Motor |
| CAPITAL ONE vs. Visa Inc | CAPITAL ONE vs. Visa Inc | CAPITAL ONE vs. American Express | CAPITAL ONE vs. ORIX Corporation |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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