Correlation Between Ford and Canadian Western
Can any of the company-specific risk be diversified away by investing in both Ford and Canadian Western 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 Canadian Western into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Canadian Western Bank, you can compare the effects of market volatilities on Ford and Canadian Western 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 Canadian Western. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Canadian Western.
Diversification Opportunities for Ford and Canadian Western
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Canadian is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Canadian Western Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Western Bank 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 Canadian Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Western Bank has no effect on the direction of Ford i.e., Ford and Canadian Western go up and down completely randomly.
Pair Corralation between Ford and Canadian Western
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Canadian Western. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.69 times less risky than Canadian Western. The stock trades about 0.0 of its potential returns per unit of risk. The Canadian Western Bank is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,337 in Canadian Western Bank on August 31, 2024 and sell it today you would earn a total of 3,684 from holding Canadian Western Bank or generate 157.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Ford Motor vs. Canadian Western Bank
Performance |
| Timeline |
| Ford Motor |
| Canadian Western Bank |
Ford and Canadian Western Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Canadian Western
The main advantage of trading using opposite Ford and Canadian Western positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Canadian Western 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 Canadian Western will offset losses from the drop in Canadian Western's long position.The idea behind Ford Motor and Canadian Western Bank 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.| Canadian Western vs. Laurentian Bank | Canadian Western vs. National Bank of | Canadian Western vs. Great West Lifeco | Canadian Western vs. CI Financial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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