Correlation Between Ford and Essential Energy
Can any of the company-specific risk be diversified away by investing in both Ford and Essential Energy 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 Essential Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Essential Energy Services, you can compare the effects of market volatilities on Ford and Essential Energy 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 Essential Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Essential Energy.
Diversification Opportunities for Ford and Essential Energy
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Essential is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Essential Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Energy Services 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 Essential Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Energy Services has no effect on the direction of Ford i.e., Ford and Essential Energy go up and down completely randomly.
Pair Corralation between Ford and Essential Energy
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.79 times more return on investment than Essential Energy. However, Ford Motor is 1.27 times less risky than Essential Energy. It trades about 0.01 of its potential returns per unit of risk. Essential Energy Services is currently generating about 0.0 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 Together |
| Strength | Very Weak |
| Accuracy | 30.91% |
| Values | Daily Returns |
Ford Motor vs. Essential Energy Services
Performance |
| Timeline |
| Ford Motor |
| Essential Energy Services |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Essential Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Essential Energy
The main advantage of trading using opposite Ford and Essential Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Essential Energy 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 Essential Energy will offset losses from the drop in Essential Energy's long position.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. Ford Motor |
| Essential Energy vs. Source Energy Services | Essential Energy vs. Total Energy Services | Essential Energy vs. Trican Well Service | Essential Energy vs. STEP Energy Services |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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