Correlation Between Ford and ChoiceOne Financial
Can any of the company-specific risk be diversified away by investing in both Ford and ChoiceOne Financial 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 ChoiceOne Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and ChoiceOne Financial Services, you can compare the effects of market volatilities on Ford and ChoiceOne Financial 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 ChoiceOne Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and ChoiceOne Financial.
Diversification Opportunities for Ford and ChoiceOne Financial
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and ChoiceOne is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ChoiceOne Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChoiceOne Financial 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 ChoiceOne Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChoiceOne Financial has no effect on the direction of Ford i.e., Ford and ChoiceOne Financial go up and down completely randomly.
Pair Corralation between Ford and ChoiceOne Financial
Taking into account the 90-day investment horizon Ford is expected to generate 4.58 times less return on investment than ChoiceOne Financial. In addition to that, Ford is 1.34 times more volatile than ChoiceOne Financial Services. It trades about 0.04 of its total potential returns per unit of risk. ChoiceOne Financial Services is currently generating about 0.25 per unit of volatility. If you would invest 3,308 in ChoiceOne Financial Services on August 28, 2024 and sell it today you would earn a total of 363.00 from holding ChoiceOne Financial Services or generate 10.97% 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. ChoiceOne Financial Services
Performance |
| Timeline |
| Ford Motor |
| ChoiceOne Financial |
Ford and ChoiceOne Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and ChoiceOne Financial
The main advantage of trading using opposite Ford and ChoiceOne Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, ChoiceOne Financial 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 ChoiceOne Financial will offset losses from the drop in ChoiceOne Financial's long position.The idea behind Ford Motor and ChoiceOne Financial Services 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.| ChoiceOne Financial vs. Fifth Third Bancorp | ChoiceOne Financial vs. Zions Bancorporation | ChoiceOne Financial vs. Huntington Bancshares Incorporated | ChoiceOne Financial vs. Comerica |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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