Correlation Between Ford and FBC HOLDINGS
Can any of the company-specific risk be diversified away by investing in both Ford and FBC HOLDINGS 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 FBC HOLDINGS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and FBC HOLDINGS LIMITED, you can compare the effects of market volatilities on Ford and FBC HOLDINGS 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 FBC HOLDINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and FBC HOLDINGS.
Diversification Opportunities for Ford and FBC HOLDINGS
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and FBC is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and FBC HOLDINGS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FBC HOLDINGS LIMITED 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 FBC HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FBC HOLDINGS LIMITED has no effect on the direction of Ford i.e., Ford and FBC HOLDINGS go up and down completely randomly.
Pair Corralation between Ford and FBC HOLDINGS
Taking into account the 90-day investment horizon Ford is expected to generate 25.93 times less return on investment than FBC HOLDINGS. In addition to that, Ford is 1.12 times more volatile than FBC HOLDINGS LIMITED. It trades about 0.01 of its total potential returns per unit of risk. FBC HOLDINGS LIMITED is currently generating about 0.2 per unit of volatility. If you would invest 112,459 in FBC HOLDINGS LIMITED on August 27, 2024 and sell it today you would earn a total of 11,541 from holding FBC HOLDINGS LIMITED or generate 10.26% 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. FBC HOLDINGS LIMITED
Performance |
| Timeline |
| Ford Motor |
| FBC HOLDINGS LIMITED |
Ford and FBC HOLDINGS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and FBC HOLDINGS
The main advantage of trading using opposite Ford and FBC HOLDINGS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, FBC HOLDINGS 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 FBC HOLDINGS will offset losses from the drop in FBC HOLDINGS's long position.The idea behind Ford Motor and FBC HOLDINGS LIMITED 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.| FBC HOLDINGS vs. STAR AFRICA PORATION | FBC HOLDINGS vs. CAFCA LIMITED | FBC HOLDINGS vs. FIRST MUTUAL PROPERTIES | FBC HOLDINGS vs. AFRICAN DISTILLERS LIMITED |
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 Stocks Directory module to find actively traded stocks across global markets.
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