Correlation Between Ford and FP Newspapers
Can any of the company-specific risk be diversified away by investing in both Ford and FP Newspapers 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 FP Newspapers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and FP Newspapers, you can compare the effects of market volatilities on Ford and FP Newspapers 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 FP Newspapers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and FP Newspapers.
Diversification Opportunities for Ford and FP Newspapers
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ford and FPNUF is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and FP Newspapers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FP Newspapers 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 FP Newspapers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FP Newspapers has no effect on the direction of Ford i.e., Ford and FP Newspapers go up and down completely randomly.
Pair Corralation between Ford and FP Newspapers
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.27 times more return on investment than FP Newspapers. However, Ford Motor is 3.72 times less risky than FP Newspapers. It trades about -0.1 of its potential returns per unit of risk. FP Newspapers is currently generating about -0.17 per unit of risk. If you would invest 1,082 in Ford Motor on November 3, 2024 and sell it today you would lose (74.00) from holding Ford Motor or give up 6.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.56% |
| Values | Daily Returns |
Ford Motor vs. FP Newspapers
Performance |
| Timeline |
| Ford Motor |
| FP Newspapers |
Ford and FP Newspapers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and FP Newspapers
The main advantage of trading using opposite Ford and FP Newspapers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, FP Newspapers 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 FP Newspapers will offset losses from the drop in FP Newspapers' long position.The idea behind Ford Motor and FP Newspapers 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.| FP Newspapers vs. NETGEAR | FP Newspapers vs. Alto Neuroscience, | FP Newspapers vs. Lipocine | FP Newspapers vs. Centessa Pharmaceuticals PLC |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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