Correlation Between Ford and Chow Steel
Can any of the company-specific risk be diversified away by investing in both Ford and Chow Steel 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 Chow Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Chow Steel Industries, you can compare the effects of market volatilities on Ford and Chow Steel 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 Chow Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Chow Steel.
Diversification Opportunities for Ford and Chow Steel
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Chow is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Chow Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chow Steel Industries 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 Chow Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chow Steel Industries has no effect on the direction of Ford i.e., Ford and Chow Steel go up and down completely randomly.
Pair Corralation between Ford and Chow Steel
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Chow Steel. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 35.46 times less risky than Chow Steel. The stock trades about 0.0 of its potential returns per unit of risk. The Chow Steel Industries is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 268.00 in Chow Steel Industries on September 3, 2024 and sell it today you would lose (69.00) from holding Chow Steel Industries or give up 25.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Ford Motor vs. Chow Steel Industries
Performance |
| Timeline |
| Ford Motor |
| Chow Steel Industries |
Ford and Chow Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Chow Steel
The main advantage of trading using opposite Ford and Chow Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Chow Steel 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 Chow Steel will offset losses from the drop in Chow Steel's long position.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. Ford Motor |
| Chow Steel vs. Diamond Building Products | Chow Steel vs. MCS Steel Public | Chow Steel vs. Asia Green Energy | Chow Steel vs. Hwa Fong Rubber |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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