Correlation Between Ford and Evans Bancorp
Can any of the company-specific risk be diversified away by investing in both Ford and Evans Bancorp 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 Evans Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Evans Bancorp, you can compare the effects of market volatilities on Ford and Evans Bancorp 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 Evans Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Evans Bancorp.
Diversification Opportunities for Ford and Evans Bancorp
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and Evans is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Evans Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evans Bancorp 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 Evans Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evans Bancorp has no effect on the direction of Ford i.e., Ford and Evans Bancorp go up and down completely randomly.
Pair Corralation between Ford and Evans Bancorp
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.9 times more return on investment than Evans Bancorp. However, Ford Motor is 1.11 times less risky than Evans Bancorp. It trades about 0.14 of its potential returns per unit of risk. Evans Bancorp is currently generating about 0.05 per unit of risk. If you would invest 965.00 in Ford Motor on November 3, 2024 and sell it today you would earn a total of 43.00 from holding Ford Motor or generate 4.46% 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. Evans Bancorp
Performance |
| Timeline |
| Ford Motor |
| Evans Bancorp |
Ford and Evans Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Evans Bancorp
The main advantage of trading using opposite Ford and Evans Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Evans Bancorp 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 Evans Bancorp will offset losses from the drop in Evans Bancorp's long position.The idea behind Ford Motor and Evans Bancorp 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.| Evans Bancorp vs. First Community | Evans Bancorp vs. Oak Valley Bancorp | Evans Bancorp vs. First Financial Northwest | Evans Bancorp vs. ESSA Bancorp |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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