Correlation Between Ford and First Community
Can any of the company-specific risk be diversified away by investing in both Ford and First Community 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 First Community into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and First Community Financial, you can compare the effects of market volatilities on Ford and First Community 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 First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and First Community.
Diversification Opportunities for Ford and First Community
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and First is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and First Community Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Financial 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 First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community Financial has no effect on the direction of Ford i.e., Ford and First Community go up and down completely randomly.
Pair Corralation between Ford and First Community
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.97 times more return on investment than First Community. However, Ford Motor is 1.03 times less risky than First Community. It trades about 0.0 of its potential returns per unit of risk. First Community Financial is currently generating about -0.15 per unit of risk. If you would invest 1,122 in Ford Motor on August 29, 2024 and sell it today you would lose (12.00) from holding Ford Motor or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. First Community Financial
Performance |
| Timeline |
| Ford Motor |
| First Community Financial |
Ford and First Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and First Community
The main advantage of trading using opposite Ford and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, First Community 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 First Community will offset losses from the drop in First Community's long position.The idea behind Ford Motor and First Community Financial 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.| First Community vs. CCSB Financial Corp | First Community vs. Bank of Utica | First Community vs. BEO Bancorp | First Community vs. First Community |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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