Correlation Between Ford and Franklin FTSE
Can any of the company-specific risk be diversified away by investing in both Ford and Franklin FTSE 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 Franklin FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Franklin FTSE Brazil, you can compare the effects of market volatilities on Ford and Franklin FTSE 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 Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Franklin FTSE.
Diversification Opportunities for Ford and Franklin FTSE
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Franklin is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Franklin FTSE Brazil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Brazil 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 Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Brazil has no effect on the direction of Ford i.e., Ford and Franklin FTSE go up and down completely randomly.
Pair Corralation between Ford and Franklin FTSE
Taking into account the 90-day investment horizon Ford is expected to generate 1.24 times less return on investment than Franklin FTSE. In addition to that, Ford is 1.19 times more volatile than Franklin FTSE Brazil. It trades about 0.19 of its total potential returns per unit of risk. Franklin FTSE Brazil is currently generating about 0.28 per unit of volatility. If you would invest 1,664 in Franklin FTSE Brazil on October 20, 2024 and sell it today you would earn a total of 90.00 from holding Franklin FTSE Brazil or generate 5.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Ford Motor vs. Franklin FTSE Brazil
Performance |
| Timeline |
| Ford Motor |
| Franklin FTSE Brazil |
Ford and Franklin FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Franklin FTSE
The main advantage of trading using opposite Ford and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Franklin FTSE 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 Franklin FTSE will offset losses from the drop in Franklin FTSE's long position.The idea behind Ford Motor and Franklin FTSE Brazil 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.| Franklin FTSE vs. Franklin LibertyQ Global | Franklin FTSE vs. Franklin Libertyshares ICAV | Franklin FTSE vs. Franklin FTSE Asia | Franklin FTSE vs. Franklin FTSE Brazil |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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