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
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Equity is 0.23. 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 is expected to generate 1.88 times less return on investment than Equity Residential. In addition to that, Ford is 1.75 times more volatile than Equity Residential. It trades about 0.02 of its total potential returns per unit of risk. Equity Residential is currently generating about 0.06 per unit of volatility. If you would invest 5,516 in Equity Residential on August 28, 2024 and sell it today you would earn a total of 2,125 from holding Equity Residential or generate 38.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| 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. Essex Property Trust | Equity Residential vs. Mid America Apartment Communities | Equity Residential vs. Camden Property Trust | Equity Residential vs. UDR Inc |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |