Correlation Between Ford and Charlottes Web
Can any of the company-specific risk be diversified away by investing in both Ford and Charlottes Web 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 Charlottes Web into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Charlottes Web Holdings, you can compare the effects of market volatilities on Ford and Charlottes Web 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 Charlottes Web. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Charlottes Web.
Diversification Opportunities for Ford and Charlottes Web
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Charlottes is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Charlottes Web Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charlottes Web Holdings 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 Charlottes Web. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charlottes Web Holdings has no effect on the direction of Ford i.e., Ford and Charlottes Web go up and down completely randomly.
Pair Corralation between Ford and Charlottes Web
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.43 times more return on investment than Charlottes Web. However, Ford Motor is 2.3 times less risky than Charlottes Web. It trades about 0.01 of its potential returns per unit of risk. Charlottes Web Holdings is currently generating about -0.04 per unit of risk. If you would invest 1,110 in Ford Motor on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Ford Motor or generate 0.0% 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. Charlottes Web Holdings
Performance |
| Timeline |
| Ford Motor |
| Charlottes Web Holdings |
Ford and Charlottes Web Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Charlottes Web
The main advantage of trading using opposite Ford and Charlottes Web positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Charlottes Web 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 Charlottes Web will offset losses from the drop in Charlottes Web's long position.The idea behind Ford Motor and Charlottes Web Holdings 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.| Charlottes Web vs. Green Cures Botanical | Charlottes Web vs. Cann American Corp | Charlottes Web vs. Rimrock Gold Corp | Charlottes Web vs. Galexxy Holdings |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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