Correlation Between Ford and Falcon Oil
Can any of the company-specific risk be diversified away by investing in both Ford and Falcon Oil 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 Falcon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Falcon Oil Gas, you can compare the effects of market volatilities on Ford and Falcon Oil 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 Falcon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Falcon Oil.
Diversification Opportunities for Ford and Falcon Oil
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Falcon is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Falcon Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Oil Gas 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 Falcon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Oil Gas has no effect on the direction of Ford i.e., Ford and Falcon Oil go up and down completely randomly.
Pair Corralation between Ford and Falcon Oil
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Falcon Oil. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.55 times less risky than Falcon Oil. The stock trades about 0.0 of its potential returns per unit of risk. The Falcon Oil Gas is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 965.00 in Falcon Oil Gas on November 5, 2024 and sell it today you would lose (240.00) from holding Falcon Oil Gas or give up 24.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.4% |
| Values | Daily Returns |
Ford Motor vs. Falcon Oil Gas
Performance |
| Timeline |
| Ford Motor |
| Falcon Oil Gas |
Ford and Falcon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Falcon Oil
The main advantage of trading using opposite Ford and Falcon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Falcon Oil 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 Falcon Oil will offset losses from the drop in Falcon Oil's long position.The idea behind Ford Motor and Falcon Oil Gas 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.| Falcon Oil vs. Morgan Advanced Materials | Falcon Oil vs. Gaztransport et Technigaz | Falcon Oil vs. Pets at Home | Falcon Oil vs. Martin Marietta Materials |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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