Correlation Between Ford and Equity Residential
Can any of the company-specific risk be diversified away by investing in both Ford and Equity Residential 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 Equity Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Equity Residential, you can compare the effects of market volatilities on Ford and Equity Residential 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 Equity Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Equity Residential.
Diversification Opportunities for Ford and Equity Residential
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Equity is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Equity Residential in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Residential 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 Equity Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Residential has no effect on the direction of Ford i.e., Ford and Equity Residential go up and down completely randomly.
Pair Corralation between Ford and Equity Residential
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Equity Residential. In addition to that, Ford is 1.29 times more volatile than Equity Residential. It trades about -0.39 of its total potential returns per unit of risk. Equity Residential is currently generating about -0.22 per unit of volatility. If you would invest 7,250 in Equity Residential on September 23, 2024 and sell it today you would lose (400.00) from holding Equity Residential or give up 5.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Equity Residential
Performance |
| Timeline |
| Ford Motor |
| Equity Residential |
Ford and Equity Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Equity Residential
The main advantage of trading using opposite Ford and Equity Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Equity Residential 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 Equity Residential will offset losses from the drop in Equity Residential's long position.The idea behind Ford Motor and Equity Residential 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.| Equity Residential vs. AvalonBay Communities | Equity Residential vs. UDR Inc | Equity Residential vs. INVITATION HOMES DL | Equity Residential vs. Mid America Apartment Communities |
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 CEOs Directory module to screen CEOs from public companies around the world.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Transaction History View history of all your transactions and understand their impact on performance |