Correlation Between Ford and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Ford and Meta Platforms 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 Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Meta Platforms, you can compare the effects of market volatilities on Ford and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Meta Platforms.
Diversification Opportunities for Ford and Meta Platforms
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Meta is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Ford i.e., Ford and Meta Platforms go up and down completely randomly.
Pair Corralation between Ford and Meta Platforms
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Meta Platforms. In addition to that, Ford is 1.02 times more volatile than Meta Platforms. It trades about 0.0 of its total potential returns per unit of risk. Meta Platforms is currently generating about 0.11 per unit of volatility. If you would invest 24,585 in Meta Platforms on September 1, 2024 and sell it today you would earn a total of 29,605 from holding Meta Platforms or generate 120.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.89% |
| Values | Daily Returns |
Ford Motor vs. Meta Platforms
Performance |
| Timeline |
| Ford Motor |
| Meta Platforms |
Ford and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Meta Platforms
The main advantage of trading using opposite Ford and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.The idea behind Ford Motor and Meta Platforms 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.| Meta Platforms vs. Amazon Inc | Meta Platforms vs. Apple Inc | Meta Platforms vs. Meta Platforms | Meta Platforms vs. Microsoft |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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