Correlation Between Ford and Emerge Commerce
Can any of the company-specific risk be diversified away by investing in both Ford and Emerge Commerce 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 Emerge Commerce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Emerge Commerce, you can compare the effects of market volatilities on Ford and Emerge Commerce 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 Emerge Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Emerge Commerce.
Diversification Opportunities for Ford and Emerge Commerce
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Emerge is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Emerge Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerge Commerce 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 Emerge Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerge Commerce has no effect on the direction of Ford i.e., Ford and Emerge Commerce go up and down completely randomly.
Pair Corralation between Ford and Emerge Commerce
Taking into account the 90-day investment horizon Ford is expected to generate 442.97 times less return on investment than Emerge Commerce. But when comparing it to its historical volatility, Ford Motor is 81.18 times less risky than Emerge Commerce. It trades about 0.04 of its potential returns per unit of risk. Emerge Commerce is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 0.12 in Emerge Commerce on August 28, 2024 and sell it today you would earn a total of 2.39 from holding Emerge Commerce or generate 1991.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Emerge Commerce
Performance |
| Timeline |
| Ford Motor |
| Emerge Commerce |
Ford and Emerge Commerce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Emerge Commerce
The main advantage of trading using opposite Ford and Emerge Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Emerge Commerce 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 Emerge Commerce will offset losses from the drop in Emerge Commerce's long position.The idea behind Ford Motor and Emerge Commerce 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.| Emerge Commerce vs. Phonex Inc | Emerge Commerce vs. Delivery Hero SE | Emerge Commerce vs. 1StdibsCom | Emerge Commerce vs. Natural Health Trend |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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