Correlation Between Ford and Columbus McKinnon
Can any of the company-specific risk be diversified away by investing in both Ford and Columbus McKinnon 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 Columbus McKinnon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Columbus McKinnon, you can compare the effects of market volatilities on Ford and Columbus McKinnon 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 Columbus McKinnon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Columbus McKinnon.
Diversification Opportunities for Ford and Columbus McKinnon
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Columbus is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Columbus McKinnon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbus McKinnon 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 Columbus McKinnon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbus McKinnon has no effect on the direction of Ford i.e., Ford and Columbus McKinnon go up and down completely randomly.
Pair Corralation between Ford and Columbus McKinnon
Taking into account the 90-day investment horizon Ford is expected to generate 8.68 times less return on investment than Columbus McKinnon. In addition to that, Ford is 1.0 times more volatile than Columbus McKinnon. It trades about 0.04 of its total potential returns per unit of risk. Columbus McKinnon is currently generating about 0.36 per unit of volatility. If you would invest 3,283 in Columbus McKinnon on August 28, 2024 and sell it today you would earn a total of 716.00 from holding Columbus McKinnon or generate 21.81% 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. Columbus McKinnon
Performance |
| Timeline |
| Ford Motor |
| Columbus McKinnon |
Ford and Columbus McKinnon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Columbus McKinnon
The main advantage of trading using opposite Ford and Columbus McKinnon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Columbus McKinnon 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 Columbus McKinnon will offset losses from the drop in Columbus McKinnon's long position.The idea behind Ford Motor and Columbus McKinnon 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.| Columbus McKinnon vs. Lindsay | Columbus McKinnon vs. Astec Industries | Columbus McKinnon vs. Shyft Group | Columbus McKinnon vs. AGCO 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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