Correlation Between Ford and Deep Value
Can any of the company-specific risk be diversified away by investing in both Ford and Deep Value 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 Deep Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Deep Value Driller, you can compare the effects of market volatilities on Ford and Deep Value 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 Deep Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Deep Value.
Diversification Opportunities for Ford and Deep Value
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Deep is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Deep Value Driller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deep Value Driller 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 Deep Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deep Value Driller has no effect on the direction of Ford i.e., Ford and Deep Value go up and down completely randomly.
Pair Corralation between Ford and Deep Value
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.9 times more return on investment than Deep Value. However, Ford Motor is 1.11 times less risky than Deep Value. It trades about 0.02 of its potential returns per unit of risk. Deep Value Driller is currently generating about -0.14 per unit of risk. If you would invest 1,096 in Ford Motor on August 29, 2024 and sell it today you would earn a total of 14.00 from holding Ford Motor or generate 1.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Ford Motor vs. Deep Value Driller
Performance |
| Timeline |
| Ford Motor |
| Deep Value Driller |
Ford and Deep Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Deep Value
The main advantage of trading using opposite Ford and Deep Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Deep Value 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 Deep Value will offset losses from the drop in Deep Value's long position.The idea behind Ford Motor and Deep Value Driller 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.| Deep Value vs. Austevoll Seafood ASA | Deep Value vs. NorAm Drilling AS | Deep Value vs. Odfjell Technology | Deep Value vs. Norwegian Air Shuttle |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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