Correlation Between Ford and Premier Foods
Can any of the company-specific risk be diversified away by investing in both Ford and Premier Foods 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 Premier Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Premier Foods PLC, you can compare the effects of market volatilities on Ford and Premier Foods 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 Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Premier Foods.
Diversification Opportunities for Ford and Premier Foods
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Premier is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Premier Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods PLC 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 Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods PLC has no effect on the direction of Ford i.e., Ford and Premier Foods go up and down completely randomly.
Pair Corralation between Ford and Premier Foods
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.36 times more return on investment than Premier Foods. However, Ford is 1.36 times more volatile than Premier Foods PLC. It trades about 0.22 of its potential returns per unit of risk. Premier Foods PLC is currently generating about 0.09 per unit of risk. If you would invest 1,022 in Ford Motor on September 3, 2024 and sell it today you would earn a total of 91.00 from holding Ford Motor or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Ford Motor vs. Premier Foods PLC
Performance |
| Timeline |
| Ford Motor |
| Premier Foods PLC |
Ford and Premier Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Premier Foods
The main advantage of trading using opposite Ford and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Premier Foods 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 Premier Foods will offset losses from the drop in Premier Foods' long position.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. Ford Motor |
| Premier Foods vs. Nestl SA | Premier Foods vs. Kraft Heinz Co | Premier Foods vs. General Mills | Premier Foods vs. Kellogg Company |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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