Correlation Between Ford and Elis SA
Can any of the company-specific risk be diversified away by investing in both Ford and Elis SA 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 Elis SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Elis SA, you can compare the effects of market volatilities on Ford and Elis SA 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 Elis SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Elis SA.
Diversification Opportunities for Ford and Elis SA
Weak diversification
The 3 months correlation between Ford and Elis is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Elis SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elis SA 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 Elis SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elis SA has no effect on the direction of Ford i.e., Ford and Elis SA go up and down completely randomly.
Pair Corralation between Ford and Elis SA
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Elis SA. In addition to that, Ford is 1.19 times more volatile than Elis SA. It trades about -0.02 of its total potential returns per unit of risk. Elis SA is currently generating about 0.01 per unit of volatility. If you would invest 2,006 in Elis SA on November 3, 2024 and sell it today you would lose (32.00) from holding Elis SA or give up 1.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Ford Motor vs. Elis SA
Performance |
| Timeline |
| Ford Motor |
| Elis SA |
Ford and Elis SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Elis SA
The main advantage of trading using opposite Ford and Elis SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Elis SA 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 Elis SA will offset losses from the drop in Elis SA's long position.The idea behind Ford Motor and Elis SA 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.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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