Correlation Between Ford and Central Japan
Can any of the company-specific risk be diversified away by investing in both Ford and Central Japan 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 Central Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Central Japan Railway, you can compare the effects of market volatilities on Ford and Central Japan 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 Central Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Central Japan.
Diversification Opportunities for Ford and Central Japan
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Central is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Central Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Japan Railway 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 Central Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Japan Railway has no effect on the direction of Ford i.e., Ford and Central Japan go up and down completely randomly.
Pair Corralation between Ford and Central Japan
Taking into account the 90-day investment horizon Ford is expected to generate 1542.81 times less return on investment than Central Japan. But when comparing it to its historical volatility, Ford Motor is 55.48 times less risky than Central Japan. It trades about 0.01 of its potential returns per unit of risk. Central Japan Railway is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 12,000 in Central Japan Railway on September 3, 2024 and sell it today you would lose (9,441) from holding Central Japan Railway or give up 78.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 46.26% |
| Values | Daily Returns |
Ford Motor vs. Central Japan Railway
Performance |
| Timeline |
| Ford Motor |
| Central Japan Railway |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Central Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Central Japan
The main advantage of trading using opposite Ford and Central Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Central Japan 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 Central Japan will offset losses from the drop in Central Japan's long position.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. Ford Motor |
| Central Japan vs. West Japan Railway | Central Japan vs. Central Japan Railway | Central Japan vs. LB Foster |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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