Correlation Between Ford and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Ford and Emerging Markets 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 Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Emerging Markets Sustainability, you can compare the effects of market volatilities on Ford and Emerging Markets 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 Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Emerging Markets.
Diversification Opportunities for Ford and Emerging Markets
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Emerging is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Emerging Markets Sustainabilit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Sus 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Sus has no effect on the direction of Ford i.e., Ford and Emerging Markets go up and down completely randomly.
Pair Corralation between Ford and Emerging Markets
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.93 times more return on investment than Emerging Markets. However, Ford is 2.93 times more volatile than Emerging Markets Sustainability. It trades about -0.03 of its potential returns per unit of risk. Emerging Markets Sustainability is currently generating about -0.1 per unit of risk. If you would invest 1,077 in Ford Motor on September 13, 2024 and sell it today you would lose (38.00) from holding Ford Motor or give up 3.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Ford Motor vs. Emerging Markets Sustainabilit
Performance |
| Timeline |
| Ford Motor |
| Emerging Markets Sus |
Ford and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Emerging Markets
The main advantage of trading using opposite Ford and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.The idea behind Ford Motor and Emerging Markets Sustainability 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.| Emerging Markets vs. Dfa Intl Sustainability | Emerging Markets vs. Dfa Sustainability Core | Emerging Markets vs. Dfa Investment Dimensions | Emerging Markets vs. Dfa Sustainability Targeted |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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