Correlation Between Ford and Engie Brasil
Can any of the company-specific risk be diversified away by investing in both Ford and Engie Brasil 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 Engie Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Engie Brasil Energia, you can compare the effects of market volatilities on Ford and Engie Brasil 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 Engie Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Engie Brasil.
Diversification Opportunities for Ford and Engie Brasil
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Engie is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Engie Brasil Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie Brasil Energia 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 Engie Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie Brasil Energia has no effect on the direction of Ford i.e., Ford and Engie Brasil go up and down completely randomly.
Pair Corralation between Ford and Engie Brasil
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.11 times more return on investment than Engie Brasil. However, Ford is 2.11 times more volatile than Engie Brasil Energia. It trades about 0.04 of its potential returns per unit of risk. Engie Brasil Energia is currently generating about -0.14 per unit of risk. If you would invest 1,122 in Ford Motor on August 28, 2024 and sell it today you would earn a total of 18.00 from holding Ford Motor or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Ford Motor vs. Engie Brasil Energia
Performance |
| Timeline |
| Ford Motor |
| Engie Brasil Energia |
Ford and Engie Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Engie Brasil
The main advantage of trading using opposite Ford and Engie Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Engie Brasil 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 Engie Brasil will offset losses from the drop in Engie Brasil's long position.The idea behind Ford Motor and Engie Brasil Energia 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.| Engie Brasil vs. BB Seguridade Participacoes | Engie Brasil vs. CTEEP Companhia | Engie Brasil vs. Itasa Investimentos |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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