Correlation Between Ford and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both Ford and Fortune Brands 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 Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Fortune Brands Home, you can compare the effects of market volatilities on Ford and Fortune Brands 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 Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Fortune Brands.
Diversification Opportunities for Ford and Fortune Brands
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ford and Fortune is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fortune Brands Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Home 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 Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Home has no effect on the direction of Ford i.e., Ford and Fortune Brands go up and down completely randomly.
Pair Corralation between Ford and Fortune Brands
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.1 times more return on investment than Fortune Brands. However, Ford Motor is 9.63 times less risky than Fortune Brands. It trades about 0.01 of its potential returns per unit of risk. Fortune Brands Home is currently generating about -0.18 per unit of risk. If you would invest 1,140 in Ford Motor on September 4, 2024 and sell it today you would lose (42.00) from holding Ford Motor or give up 3.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 4.24% |
| Values | Daily Returns |
Ford Motor vs. Fortune Brands Home
Performance |
| Timeline |
| Ford Motor |
| Fortune Brands Home |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Fortune Brands
The main advantage of trading using opposite Ford and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Fortune Brands 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 Fortune Brands will offset losses from the drop in Fortune Brands' long position.The idea behind Ford Motor and Fortune Brands Home 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.| Fortune Brands vs. Mitsubishi UFJ Lease | Fortune Brands vs. Vestis | Fortune Brands vs. Air Lease | Fortune Brands vs. Fortress Transp Infra |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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