Correlation Between Ford and Compass Group
Can any of the company-specific risk be diversified away by investing in both Ford and Compass Group 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 Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Compass Group PLC, you can compare the effects of market volatilities on Ford and Compass Group 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 Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Compass Group.
Diversification Opportunities for Ford and Compass Group
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Compass is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC 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 Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Ford i.e., Ford and Compass Group go up and down completely randomly.
Pair Corralation between Ford and Compass Group
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.29 times more return on investment than Compass Group. However, Ford is 1.29 times more volatile than Compass Group PLC. It trades about 0.14 of its potential returns per unit of risk. Compass Group PLC is currently generating about 0.14 per unit of risk. If you would invest 988.00 in Ford Motor on October 21, 2024 and sell it today you would earn a total of 30.00 from holding Ford Motor or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Compass Group PLC
Performance |
| Timeline |
| Ford Motor |
| Compass Group PLC |
Ford and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Compass Group
The main advantage of trading using opposite Ford and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Compass Group 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 Compass Group will offset losses from the drop in Compass Group's long position.The idea behind Ford Motor and Compass Group PLC 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.| Compass Group vs. MoneysupermarketCom Group PLC | Compass Group vs. Seraphim Space Investment | Compass Group vs. Beeks Trading | Compass Group vs. Supermarket Income REIT |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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