Correlation Between Ford and EDP Energias
Can any of the company-specific risk be diversified away by investing in both Ford and EDP Energias 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 EDP Energias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and EDP Energias de, you can compare the effects of market volatilities on Ford and EDP Energias 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 EDP Energias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and EDP Energias.
Diversification Opportunities for Ford and EDP Energias
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and EDP is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and EDP Energias de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Energias de 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 EDP Energias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Energias de has no effect on the direction of Ford i.e., Ford and EDP Energias go up and down completely randomly.
Pair Corralation between Ford and EDP Energias
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.44 times more return on investment than EDP Energias. However, Ford is 1.44 times more volatile than EDP Energias de. It trades about 0.01 of its potential returns per unit of risk. EDP Energias de is currently generating about -0.02 per unit of risk. If you would invest 1,148 in Ford Motor on September 3, 2024 and sell it today you would lose (50.00) from holding Ford Motor or give up 4.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. EDP Energias de
Performance |
| Timeline |
| Ford Motor |
| EDP Energias de |
Ford and EDP Energias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and EDP Energias
The main advantage of trading using opposite Ford and EDP Energias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, EDP Energias 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 EDP Energias will offset losses from the drop in EDP Energias' long position.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. Ford Motor |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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