Correlation Between Ford and CNB Corp
Can any of the company-specific risk be diversified away by investing in both Ford and CNB Corp 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 CNB Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and CNB Corp, you can compare the effects of market volatilities on Ford and CNB Corp 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 CNB Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and CNB Corp.
Diversification Opportunities for Ford and CNB Corp
Pay attention - limited upside
The 3 months correlation between Ford and CNB is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and CNB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNB Corp 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 CNB Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNB Corp has no effect on the direction of Ford i.e., Ford and CNB Corp go up and down completely randomly.
Pair Corralation between Ford and CNB Corp
Taking into account the 90-day investment horizon Ford is expected to generate 4.48 times less return on investment than CNB Corp. But when comparing it to its historical volatility, Ford Motor is 1.24 times less risky than CNB Corp. It trades about 0.01 of its potential returns per unit of risk. CNB Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,730 in CNB Corp on September 2, 2024 and sell it today you would earn a total of 1,770 from holding CNB Corp or generate 37.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. CNB Corp
Performance |
| Timeline |
| Ford Motor |
| CNB Corp |
Ford and CNB Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and CNB Corp
The main advantage of trading using opposite Ford and CNB Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, CNB Corp 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 CNB Corp will offset losses from the drop in CNB Corp's long position.The idea behind Ford Motor and CNB Corp 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.| CNB Corp vs. Apollo Bancorp | CNB Corp vs. The Farmers Bank | CNB Corp vs. Bank of Utica | CNB Corp vs. Delhi Bank Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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