Correlation Between Ford and Commercial Metals
Can any of the company-specific risk be diversified away by investing in both Ford and Commercial Metals 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 Commercial Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Commercial Metals, you can compare the effects of market volatilities on Ford and Commercial Metals 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 Commercial Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Commercial Metals.
Diversification Opportunities for Ford and Commercial Metals
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Commercial is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Commercial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Metals 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 Commercial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Metals has no effect on the direction of Ford i.e., Ford and Commercial Metals go up and down completely randomly.
Pair Corralation between Ford and Commercial Metals
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Commercial Metals. In addition to that, Ford is 1.18 times more volatile than Commercial Metals. It trades about 0.0 of its total potential returns per unit of risk. Commercial Metals is currently generating about 0.05 per unit of volatility. If you would invest 5,348 in Commercial Metals on August 27, 2024 and sell it today you would earn a total of 774.00 from holding Commercial Metals or generate 14.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Commercial Metals
Performance |
| Timeline |
| Ford Motor |
| Commercial Metals |
Ford and Commercial Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Commercial Metals
The main advantage of trading using opposite Ford and Commercial Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Commercial Metals 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 Commercial Metals will offset losses from the drop in Commercial Metals' long position.The idea behind Ford Motor and Commercial Metals 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.| Commercial Metals vs. Olympic Steel | Commercial Metals vs. Steel Dynamics | Commercial Metals vs. Nucor Corp | Commercial Metals vs. Universal Stainless Alloy |
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 CEOs Directory module to screen CEOs from public companies around the world.
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