Correlation Between Ford and CEMEX SAB
Can any of the company-specific risk be diversified away by investing in both Ford and CEMEX SAB 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 CEMEX SAB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and CEMEX SAB de, you can compare the effects of market volatilities on Ford and CEMEX SAB 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 CEMEX SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and CEMEX SAB.
Diversification Opportunities for Ford and CEMEX SAB
Very good diversification
The 3 months correlation between Ford and CEMEX is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and CEMEX SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEMEX SAB de 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 CEMEX SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEMEX SAB de has no effect on the direction of Ford i.e., Ford and CEMEX SAB go up and down completely randomly.
Pair Corralation between Ford and CEMEX SAB
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.68 times more return on investment than CEMEX SAB. However, Ford Motor is 1.47 times less risky than CEMEX SAB. It trades about 0.0 of its potential returns per unit of risk. CEMEX SAB de is currently generating about -0.03 per unit of risk. If you would invest 1,169 in Ford Motor on September 2, 2024 and sell it today you would lose (56.00) from holding Ford Motor or give up 4.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Ford Motor vs. CEMEX SAB de
Performance |
| Timeline |
| Ford Motor |
| CEMEX SAB de |
Ford and CEMEX SAB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and CEMEX SAB
The main advantage of trading using opposite Ford and CEMEX SAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, CEMEX SAB 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 CEMEX SAB will offset losses from the drop in CEMEX SAB's long position.The idea behind Ford Motor and CEMEX SAB de 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.| CEMEX SAB vs. Cementos Pacasmayo SAA | CEMEX SAB vs. Summit Materials | CEMEX SAB vs. Eagle Materials | CEMEX SAB vs. CRH PLC ADR |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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