Correlation Between Ford and Erste Group
Can any of the company-specific risk be diversified away by investing in both Ford and Erste Group 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 Erste Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Erste Group Bank, you can compare the effects of market volatilities on Ford and Erste Group 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Erste Group.
Diversification Opportunities for Ford and Erste Group
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and Erste is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Ford i.e., Ford and Erste Group go up and down completely randomly.
Pair Corralation between Ford and Erste Group
Taking into account the 90-day investment horizon Ford is expected to generate 12.06 times less return on investment than Erste Group. In addition to that, Ford is 1.15 times more volatile than Erste Group Bank. It trades about 0.01 of its total potential returns per unit of risk. Erste Group Bank is currently generating about 0.16 per unit of volatility. If you would invest 3,072 in Erste Group Bank on October 25, 2024 and sell it today you would earn a total of 127.00 from holding Erste Group Bank or generate 4.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Ford Motor vs. Erste Group Bank
Performance |
| Timeline |
| Ford Motor |
| Erste Group Bank |
Ford and Erste Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Erste Group
The main advantage of trading using opposite Ford and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Erste Group 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 Erste Group will offset losses from the drop in Erste Group's long position.The idea behind Ford Motor and Erste Group Bank 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.| Erste Group vs. DBS Group Holdings | Erste Group vs. Swedbank AB | Erste Group vs. United Overseas Bank | Erste Group vs. Bank Mandiri Persero |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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