Correlation Between Ford and Federated Short-term
Can any of the company-specific risk be diversified away by investing in both Ford and Federated Short-term 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 Federated Short-term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Federated Short Term Income, you can compare the effects of market volatilities on Ford and Federated Short-term 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 Federated Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Federated Short-term.
Diversification Opportunities for Ford and Federated Short-term
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Federated is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Federated Short Term Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Short Term 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 Federated Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Short Term has no effect on the direction of Ford i.e., Ford and Federated Short-term go up and down completely randomly.
Pair Corralation between Ford and Federated Short-term
Taking into account the 90-day investment horizon Ford Motor is expected to generate 20.3 times more return on investment than Federated Short-term. However, Ford is 20.3 times more volatile than Federated Short Term Income. It trades about 0.05 of its potential returns per unit of risk. Federated Short Term Income is currently generating about 0.04 per unit of risk. If you would invest 1,092 in Ford Motor on August 26, 2024 and sell it today you would earn a total of 26.00 from holding Ford Motor or generate 2.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Federated Short Term Income
Performance |
| Timeline |
| Ford Motor |
| Federated Short Term |
Ford and Federated Short-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Federated Short-term
The main advantage of trading using opposite Ford and Federated Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Federated Short-term 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 Federated Short-term will offset losses from the drop in Federated Short-term's long position.The idea behind Ford Motor and Federated Short Term Income 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.| Federated Short-term vs. Federated Emerging Market | Federated Short-term vs. Federated Mdt All | Federated Short-term vs. Federated Mdt Balanced | Federated Short-term vs. Federated Global Allocation |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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