Correlation Between Ford and Farmers Edge
Can any of the company-specific risk be diversified away by investing in both Ford and Farmers Edge 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 Farmers Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Farmers Edge, you can compare the effects of market volatilities on Ford and Farmers Edge 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 Farmers Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Farmers Edge.
Diversification Opportunities for Ford and Farmers Edge
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Farmers is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Farmers Edge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Edge 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 Farmers Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Edge has no effect on the direction of Ford i.e., Ford and Farmers Edge go up and down completely randomly.
Pair Corralation between Ford and Farmers Edge
If you would invest 974.00 in Ford Motor on October 20, 2024 and sell it today you would earn a total of 44.00 from holding Ford Motor or generate 4.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 5.0% |
| Values | Daily Returns |
Ford Motor vs. Farmers Edge
Performance |
| Timeline |
| Ford Motor |
| Farmers Edge |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Farmers Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Farmers Edge
The main advantage of trading using opposite Ford and Farmers Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Farmers Edge 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 Farmers Edge will offset losses from the drop in Farmers Edge's long position.The idea behind Ford Motor and Farmers Edge 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.| Farmers Edge vs. RenoWorks Software | Farmers Edge vs. 01 Communique Laboratory | Farmers Edge vs. RESAAS Services | Farmers Edge vs. LifeSpeak |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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