Correlation Between Ford and FIT Hon
Can any of the company-specific risk be diversified away by investing in both Ford and FIT Hon 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 FIT Hon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and FIT Hon Teng, you can compare the effects of market volatilities on Ford and FIT Hon 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 FIT Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and FIT Hon.
Diversification Opportunities for Ford and FIT Hon
Modest diversification
The 3 months correlation between Ford and FIT is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and FIT Hon Teng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIT Hon Teng 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 FIT Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIT Hon Teng has no effect on the direction of Ford i.e., Ford and FIT Hon go up and down completely randomly.
Pair Corralation between Ford and FIT Hon
Taking into account the 90-day investment horizon Ford is expected to generate 9.61 times less return on investment than FIT Hon. But when comparing it to its historical volatility, Ford Motor is 3.22 times less risky than FIT Hon. It trades about 0.04 of its potential returns per unit of risk. FIT Hon Teng is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 36.00 in FIT Hon Teng on August 28, 2024 and sell it today you would earn a total of 6.00 from holding FIT Hon Teng or generate 16.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. FIT Hon Teng
Performance |
| Timeline |
| Ford Motor |
| FIT Hon Teng |
Ford and FIT Hon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and FIT Hon
The main advantage of trading using opposite Ford and FIT Hon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, FIT Hon 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 FIT Hon will offset losses from the drop in FIT Hon's long position.The idea behind Ford Motor and FIT Hon Teng 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.| FIT Hon vs. KULR Technology Group | FIT Hon vs. Ouster Inc | FIT Hon vs. MicroCloud Hologram | FIT Hon vs. Kopin |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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