Correlation Between Ford and FirstCash
Can any of the company-specific risk be diversified away by investing in both Ford and FirstCash 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 FirstCash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and FirstCash, you can compare the effects of market volatilities on Ford and FirstCash 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 FirstCash. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and FirstCash.
Diversification Opportunities for Ford and FirstCash
Good diversification
The 3 months correlation between Ford and FirstCash is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and FirstCash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstCash 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 FirstCash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstCash has no effect on the direction of Ford i.e., Ford and FirstCash go up and down completely randomly.
Pair Corralation between Ford and FirstCash
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.39 times more return on investment than FirstCash. However, Ford is 1.39 times more volatile than FirstCash. It trades about 0.03 of its potential returns per unit of risk. FirstCash is currently generating about -0.01 per unit of risk. If you would invest 989.00 in Ford Motor on August 27, 2024 and sell it today you would earn a total of 129.00 from holding Ford Motor or generate 13.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. FirstCash
Performance |
| Timeline |
| Ford Motor |
| FirstCash |
Ford and FirstCash Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and FirstCash
The main advantage of trading using opposite Ford and FirstCash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, FirstCash 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 FirstCash will offset losses from the drop in FirstCash's long position.The idea behind Ford Motor and FirstCash 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.| FirstCash vs. World Acceptance | FirstCash vs. Enova International | FirstCash vs. Green Dot | FirstCash vs. Medallion Financial Corp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |