Correlation Between Ford and Eventide Healthcare
Can any of the company-specific risk be diversified away by investing in both Ford and Eventide Healthcare 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 Eventide Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Eventide Healthcare Life, you can compare the effects of market volatilities on Ford and Eventide Healthcare 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 Eventide Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Eventide Healthcare.
Diversification Opportunities for Ford and Eventide Healthcare
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Eventide is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Eventide Healthcare Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eventide Healthcare Life 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 Eventide Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eventide Healthcare Life has no effect on the direction of Ford i.e., Ford and Eventide Healthcare go up and down completely randomly.
Pair Corralation between Ford and Eventide Healthcare
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.49 times more return on investment than Eventide Healthcare. However, Ford is 1.49 times more volatile than Eventide Healthcare Life. It trades about 0.01 of its potential returns per unit of risk. Eventide Healthcare Life is currently generating about 0.01 per unit of risk. If you would invest 1,094 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 16.00 from holding Ford Motor or generate 1.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Eventide Healthcare Life
Performance |
| Timeline |
| Ford Motor |
| Eventide Healthcare Life |
Ford and Eventide Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Eventide Healthcare
The main advantage of trading using opposite Ford and Eventide Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Eventide Healthcare 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 Eventide Healthcare will offset losses from the drop in Eventide Healthcare's long position.The idea behind Ford Motor and Eventide Healthcare Life 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.| Eventide Healthcare vs. Vanguard Energy Fund | Eventide Healthcare vs. Vanguard Dividend Growth | Eventide Healthcare vs. Vanguard Wellington Fund | Eventide Healthcare vs. Vanguard Capital Opportunity |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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