Correlation Between Ford and Dolphin Drilling
Can any of the company-specific risk be diversified away by investing in both Ford and Dolphin Drilling 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 Dolphin Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Dolphin Drilling AS, you can compare the effects of market volatilities on Ford and Dolphin Drilling 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 Dolphin Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Dolphin Drilling.
Diversification Opportunities for Ford and Dolphin Drilling
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Dolphin is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dolphin Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolphin Drilling 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 Dolphin Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolphin Drilling has no effect on the direction of Ford i.e., Ford and Dolphin Drilling go up and down completely randomly.
Pair Corralation between Ford and Dolphin Drilling
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.82 times more return on investment than Dolphin Drilling. However, Ford Motor is 1.22 times less risky than Dolphin Drilling. It trades about 0.0 of its potential returns per unit of risk. Dolphin Drilling AS is currently generating about -0.13 per unit of risk. If you would invest 1,122 in Ford Motor on August 29, 2024 and sell it today you would lose (12.00) from holding Ford Motor or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Dolphin Drilling AS
Performance |
| Timeline |
| Ford Motor |
| Dolphin Drilling |
Ford and Dolphin Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Dolphin Drilling
The main advantage of trading using opposite Ford and Dolphin Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Dolphin Drilling 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 Dolphin Drilling will offset losses from the drop in Dolphin Drilling's long position.The idea behind Ford Motor and Dolphin Drilling AS 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.| Dolphin Drilling vs. BW Offshore | Dolphin Drilling vs. Elkem ASA | Dolphin Drilling vs. Solstad Offsho | Dolphin Drilling vs. Arcticzymes Technologies ASA |
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 CEOs Directory module to screen CEOs from public companies around the world.
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