Correlation Between Ford and Gamco International
Can any of the company-specific risk be diversified away by investing in both Ford and Gamco International 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 Gamco International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Gamco International Growth, you can compare the effects of market volatilities on Ford and Gamco International 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 Gamco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Gamco International.
Diversification Opportunities for Ford and Gamco International
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Gamco is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Gamco International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamco International 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 Gamco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamco International has no effect on the direction of Ford i.e., Ford and Gamco International go up and down completely randomly.
Pair Corralation between Ford and Gamco International
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.85 times more return on investment than Gamco International. However, Ford is 2.85 times more volatile than Gamco International Growth. It trades about 0.08 of its potential returns per unit of risk. Gamco International Growth is currently generating about -0.32 per unit of risk. If you would invest 1,042 in Ford Motor on August 29, 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 Against |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Ford Motor vs. Gamco International Growth
Performance |
| Timeline |
| Ford Motor |
| Gamco International |
Ford and Gamco International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Gamco International
The main advantage of trading using opposite Ford and Gamco International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Gamco International 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 Gamco International will offset losses from the drop in Gamco International's long position.The idea behind Ford Motor and Gamco International Growth 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.| Gamco International vs. Strategic Allocation Aggressive | Gamco International vs. Touchstone Large Cap | Gamco International vs. Pace Large Growth | Gamco International vs. Goldman Sachs Large |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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