Correlation Between Ford and Dingdong ADR
Can any of the company-specific risk be diversified away by investing in both Ford and Dingdong ADR 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 Dingdong ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Dingdong ADR, you can compare the effects of market volatilities on Ford and Dingdong ADR 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 Dingdong ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Dingdong ADR.
Diversification Opportunities for Ford and Dingdong ADR
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Dingdong is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dingdong ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dingdong ADR 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 Dingdong ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dingdong ADR has no effect on the direction of Ford i.e., Ford and Dingdong ADR go up and down completely randomly.
Pair Corralation between Ford and Dingdong ADR
Taking into account the 90-day investment horizon Ford is expected to generate 12.33 times less return on investment than Dingdong ADR. But when comparing it to its historical volatility, Ford Motor is 2.21 times less risky than Dingdong ADR. It trades about 0.02 of its potential returns per unit of risk. Dingdong ADR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 141.00 in Dingdong ADR on August 28, 2024 and sell it today you would earn a total of 230.00 from holding Dingdong ADR or generate 163.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Dingdong ADR
Performance |
| Timeline |
| Ford Motor |
| Dingdong ADR |
Ford and Dingdong ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Dingdong ADR
The main advantage of trading using opposite Ford and Dingdong ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Dingdong ADR 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 Dingdong ADR will offset losses from the drop in Dingdong ADR's long position.The idea behind Ford Motor and Dingdong ADR 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.| Dingdong ADR vs. Village Super Market | Dingdong ADR vs. Weis Markets | Dingdong ADR vs. Sendas Distribuidora SA | Dingdong ADR vs. Ingles Markets Incorporated |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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