Correlation Between Ford and European Residential
Can any of the company-specific risk be diversified away by investing in both Ford and European 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 European 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 European Residential Real, you can compare the effects of market volatilities on Ford and European 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 European Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and European Residential.
Diversification Opportunities for Ford and European Residential
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and European is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and European Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Residential Real 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 European Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Residential Real has no effect on the direction of Ford i.e., Ford and European Residential go up and down completely randomly.
Pair Corralation between Ford and European Residential
Taking into account the 90-day investment horizon Ford is expected to generate 2.28 times less return on investment than European Residential. But when comparing it to its historical volatility, Ford Motor is 1.81 times less risky than European Residential. It trades about 0.23 of its potential returns per unit of risk. European Residential Real is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 306.00 in European Residential Real on September 1, 2024 and sell it today you would earn a total of 74.00 from holding European Residential Real or generate 24.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. European Residential Real
Performance |
| Timeline |
| Ford Motor |
| European Residential Real |
Ford and European Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and European Residential
The main advantage of trading using opposite Ford and European Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, European 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 European Residential will offset losses from the drop in European Residential's long position.The idea behind Ford Motor and European Residential Real 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.| European Residential vs. BSR Real Estate | European Residential vs. Minto Apartment Real | European Residential vs. Nexus Real Estate | European Residential vs. Morguard North American |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Transaction History View history of all your transactions and understand their impact on performance |