Correlation Between Ford and EMS CHEMIE
Can any of the company-specific risk be diversified away by investing in both Ford and EMS CHEMIE 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 EMS CHEMIE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and EMS CHEMIE HOLDING AG, you can compare the effects of market volatilities on Ford and EMS CHEMIE 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 EMS CHEMIE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and EMS CHEMIE.
Diversification Opportunities for Ford and EMS CHEMIE
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and EMS is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and EMS CHEMIE HOLDING AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMS CHEMIE HOLDING 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 EMS CHEMIE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMS CHEMIE HOLDING has no effect on the direction of Ford i.e., Ford and EMS CHEMIE go up and down completely randomly.
Pair Corralation between Ford and EMS CHEMIE
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.04 times more return on investment than EMS CHEMIE. However, Ford is 2.04 times more volatile than EMS CHEMIE HOLDING AG. It trades about 0.01 of its potential returns per unit of risk. EMS CHEMIE HOLDING AG is currently generating about -0.01 per unit of risk. If you would invest 1,131 in Ford Motor on August 29, 2024 and sell it today you would lose (21.00) from holding Ford Motor or give up 1.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.52% |
| Values | Daily Returns |
Ford Motor vs. EMS CHEMIE HOLDING AG
Performance |
| Timeline |
| Ford Motor |
| EMS CHEMIE HOLDING |
Ford and EMS CHEMIE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and EMS CHEMIE
The main advantage of trading using opposite Ford and EMS CHEMIE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, EMS CHEMIE 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 EMS CHEMIE will offset losses from the drop in EMS CHEMIE's long position.The idea behind Ford Motor and EMS CHEMIE HOLDING AG 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.| EMS CHEMIE vs. Glarner Kantonalbank | EMS CHEMIE vs. Hypothekarbank Lenzburg AG | EMS CHEMIE vs. Liechtensteinische Landesbank AG | EMS CHEMIE vs. Graubuendner Kantonalbank |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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