Correlation Between Ford and Dfa Selective
Can any of the company-specific risk be diversified away by investing in both Ford and Dfa Selective 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 Dfa Selective into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Dfa Selective State, you can compare the effects of market volatilities on Ford and Dfa Selective 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 Dfa Selective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Dfa Selective.
Diversification Opportunities for Ford and Dfa Selective
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Dfa is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dfa Selective State in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Selective State 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 Dfa Selective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Selective State has no effect on the direction of Ford i.e., Ford and Dfa Selective go up and down completely randomly.
Pair Corralation between Ford and Dfa Selective
Taking into account the 90-day investment horizon Ford Motor is expected to generate 22.76 times more return on investment than Dfa Selective. However, Ford is 22.76 times more volatile than Dfa Selective State. It trades about 0.03 of its potential returns per unit of risk. Dfa Selective State is currently generating about 0.13 per unit of risk. If you would invest 1,011 in Ford Motor on September 2, 2024 and sell it today you would earn a total of 102.00 from holding Ford Motor or generate 10.09% 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. Dfa Selective State
Performance |
| Timeline |
| Ford Motor |
| Dfa Selective State |
Ford and Dfa Selective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Dfa Selective
The main advantage of trading using opposite Ford and Dfa Selective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Dfa Selective 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 Dfa Selective will offset losses from the drop in Dfa Selective's long position.The idea behind Ford Motor and Dfa Selective State 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.| Dfa Selective vs. Intal High Relative | Dfa Selective vs. Dfa International | Dfa Selective vs. Dfa Inflation Protected | Dfa Selective vs. Dfa International Small |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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