Correlation Between Ford and Equifax
Can any of the company-specific risk be diversified away by investing in both Ford and Equifax 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 Equifax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Equifax, you can compare the effects of market volatilities on Ford and Equifax 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 Equifax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Equifax.
Diversification Opportunities for Ford and Equifax
Very good diversification
The 3 months correlation between Ford and Equifax is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Equifax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equifax 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 Equifax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equifax has no effect on the direction of Ford i.e., Ford and Equifax go up and down completely randomly.
Pair Corralation between Ford and Equifax
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Equifax. In addition to that, Ford is 1.16 times more volatile than Equifax. It trades about 0.0 of its total potential returns per unit of risk. Equifax is currently generating about 0.04 per unit of volatility. If you would invest 20,422 in Equifax on August 31, 2024 and sell it today you would earn a total of 4,378 from holding Equifax or generate 21.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.16% |
| Values | Daily Returns |
Ford Motor vs. Equifax
Performance |
| Timeline |
| Ford Motor |
| Equifax |
Ford and Equifax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Equifax
The main advantage of trading using opposite Ford and Equifax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Equifax 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 Equifax will offset losses from the drop in Equifax's long position.The idea behind Ford Motor and Equifax 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.| Equifax vs. Automatic Data Processing | Equifax vs. Superior Plus Corp | Equifax vs. NMI Holdings | Equifax vs. Origin Agritech |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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