Correlation Between Ford and El Mor
Can any of the company-specific risk be diversified away by investing in both Ford and El Mor 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 El Mor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and El Mor Electric Installation, you can compare the effects of market volatilities on Ford and El Mor 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 El Mor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and El Mor.
Diversification Opportunities for Ford and El Mor
Significant diversification
The 3 months correlation between Ford and ELMR is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and El Mor Electric Installation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Mor Electric 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 El Mor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Mor Electric has no effect on the direction of Ford i.e., Ford and El Mor go up and down completely randomly.
Pair Corralation between Ford and El Mor
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the El Mor. In addition to that, Ford is 1.21 times more volatile than El Mor Electric Installation. It trades about 0.0 of its total potential returns per unit of risk. El Mor Electric Installation is currently generating about 0.04 per unit of volatility. If you would invest 103,954 in El Mor Electric Installation on September 1, 2024 and sell it today you would earn a total of 15,746 from holding El Mor Electric Installation or generate 15.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 78.23% |
| Values | Daily Returns |
Ford Motor vs. El Mor Electric Installation
Performance |
| Timeline |
| Ford Motor |
| El Mor Electric |
Ford and El Mor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and El Mor
The main advantage of trading using opposite Ford and El Mor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, El Mor 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 El Mor will offset losses from the drop in El Mor's long position.The idea behind Ford Motor and El Mor Electric Installation 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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