Correlation Between Ford and Galectin Therapeutics
Can any of the company-specific risk be diversified away by investing in both Ford and Galectin Therapeutics 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 Galectin Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Galectin Therapeutics, you can compare the effects of market volatilities on Ford and Galectin Therapeutics 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 Galectin Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Galectin Therapeutics.
Diversification Opportunities for Ford and Galectin Therapeutics
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Galectin is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Galectin Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galectin Therapeutics 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 Galectin Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galectin Therapeutics has no effect on the direction of Ford i.e., Ford and Galectin Therapeutics go up and down completely randomly.
Pair Corralation between Ford and Galectin Therapeutics
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.78 times more return on investment than Galectin Therapeutics. However, Ford Motor is 1.28 times less risky than Galectin Therapeutics. It trades about 0.08 of its potential returns per unit of risk. Galectin Therapeutics is currently generating about 0.04 per unit of risk. If you would invest 1,042 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 68.00 from holding Ford Motor or generate 6.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.73% |
| Values | Daily Returns |
Ford Motor vs. Galectin Therapeutics
Performance |
| Timeline |
| Ford Motor |
| Galectin Therapeutics |
Ford and Galectin Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Galectin Therapeutics
The main advantage of trading using opposite Ford and Galectin Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Galectin Therapeutics 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 Galectin Therapeutics will offset losses from the drop in Galectin Therapeutics' long position.The idea behind Ford Motor and Galectin Therapeutics 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.| Galectin Therapeutics vs. Madrigal Pharmaceuticals | Galectin Therapeutics vs. Viking Therapeutics | Galectin Therapeutics vs. Sarepta Therapeutics | Galectin Therapeutics vs. Hepion Pharmaceuticals |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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