Correlation Between Ford and Fuse Group
Can any of the company-specific risk be diversified away by investing in both Ford and Fuse Group 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 Fuse Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Fuse Group Holding, you can compare the effects of market volatilities on Ford and Fuse Group 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 Fuse Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Fuse Group.
Diversification Opportunities for Ford and Fuse Group
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Fuse is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fuse Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuse Group Holding 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 Fuse Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuse Group Holding has no effect on the direction of Ford i.e., Ford and Fuse Group go up and down completely randomly.
Pair Corralation between Ford and Fuse Group
Taking into account the 90-day investment horizon Ford is expected to generate 40.93 times less return on investment than Fuse Group. But when comparing it to its historical volatility, Ford Motor is 13.12 times less risky than Fuse Group. It trades about 0.04 of its potential returns per unit of risk. Fuse Group Holding is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 39.00 in Fuse Group Holding on November 3, 2024 and sell it today you would earn a total of 21.00 from holding Fuse Group Holding or generate 53.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Ford Motor vs. Fuse Group Holding
Performance |
| Timeline |
| Ford Motor |
| Fuse Group Holding |
Ford and Fuse Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Fuse Group
The main advantage of trading using opposite Ford and Fuse Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Fuse Group 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 Fuse Group will offset losses from the drop in Fuse Group's long position.The idea behind Ford Motor and Fuse Group Holding 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.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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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