Correlation Between Ford and American Century
Can any of the company-specific risk be diversified away by investing in both Ford and American Century 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 American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and American Century Sustainable, you can compare the effects of market volatilities on Ford and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and American Century.
Diversification Opportunities for Ford and American Century
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and American is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and American Century Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Sus 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Sus has no effect on the direction of Ford i.e., Ford and American Century go up and down completely randomly.
Pair Corralation between Ford and American Century
Taking into account the 90-day investment horizon Ford is expected to generate 4.41 times less return on investment than American Century. In addition to that, Ford is 2.19 times more volatile than American Century Sustainable. It trades about 0.01 of its total potential returns per unit of risk. American Century Sustainable is currently generating about 0.11 per unit of volatility. If you would invest 3,317 in American Century Sustainable on August 30, 2024 and sell it today you would earn a total of 2,402 from holding American Century Sustainable or generate 72.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. American Century Sustainable
Performance |
| Timeline |
| Ford Motor |
| American Century Sus |
Ford and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and American Century
The main advantage of trading using opposite Ford and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century's long position.The idea behind Ford Motor and American Century Sustainable 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.| American Century vs. American Century Sustainable | American Century vs. IndexIQ Active ETF | American Century vs. FlexShares STOXX Global | American Century vs. Putnam Focused Large |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |