Correlation Between Ford and EasyJet Plc
Can any of the company-specific risk be diversified away by investing in both Ford and EasyJet Plc 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 EasyJet Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and easyJet plc, you can compare the effects of market volatilities on Ford and EasyJet Plc 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 EasyJet Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and EasyJet Plc.
Diversification Opportunities for Ford and EasyJet Plc
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and EasyJet is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and easyJet plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on easyJet plc 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 EasyJet Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of easyJet plc has no effect on the direction of Ford i.e., Ford and EasyJet Plc go up and down completely randomly.
Pair Corralation between Ford and EasyJet Plc
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.83 times more return on investment than EasyJet Plc. However, Ford is 1.83 times more volatile than easyJet plc. It trades about 0.04 of its potential returns per unit of risk. easyJet plc is currently generating about -0.23 per unit of risk. If you would invest 1,122 in Ford Motor on August 27, 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 Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. easyJet plc
Performance |
| Timeline |
| Ford Motor |
| easyJet plc |
Ford and EasyJet Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and EasyJet Plc
The main advantage of trading using opposite Ford and EasyJet Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, EasyJet Plc 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 EasyJet Plc will offset losses from the drop in EasyJet Plc's long position.The idea behind Ford Motor and easyJet plc 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.| EasyJet Plc vs. Finnair Oyj | EasyJet Plc vs. Norse Atlantic ASA | EasyJet Plc vs. Air New Zealand | EasyJet Plc vs. Air China Limited |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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