Correlation Between Ford and Aberdeen Emerging
Can any of the company-specific risk be diversified away by investing in both Ford and Aberdeen Emerging 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 Aberdeen Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Aberdeen Emerging Markets, you can compare the effects of market volatilities on Ford and Aberdeen Emerging 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 Aberdeen Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Aberdeen Emerging.
Diversification Opportunities for Ford and Aberdeen Emerging
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Aberdeen is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aberdeen Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Emerging Markets 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 Aberdeen Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Emerging Markets has no effect on the direction of Ford i.e., Ford and Aberdeen Emerging go up and down completely randomly.
Pair Corralation between Ford and Aberdeen Emerging
Taking into account the 90-day investment horizon Ford is expected to generate 3.69 times less return on investment than Aberdeen Emerging. In addition to that, Ford is 2.55 times more volatile than Aberdeen Emerging Markets. It trades about 0.0 of its total potential returns per unit of risk. Aberdeen Emerging Markets is currently generating about 0.02 per unit of volatility. If you would invest 1,286 in Aberdeen Emerging Markets on August 26, 2024 and sell it today you would earn a total of 70.00 from holding Aberdeen Emerging Markets or generate 5.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Aberdeen Emerging Markets
Performance |
| Timeline |
| Ford Motor |
| Aberdeen Emerging Markets |
Ford and Aberdeen Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Aberdeen Emerging
The main advantage of trading using opposite Ford and Aberdeen Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Aberdeen Emerging 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 Aberdeen Emerging will offset losses from the drop in Aberdeen Emerging's long position.The idea behind Ford Motor and Aberdeen Emerging Markets 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.| Aberdeen Emerging vs. Aberdeen Emerging Markets | Aberdeen Emerging vs. Aberdeen Emerging Markets | Aberdeen Emerging vs. Aberdeen Gbl Eq | Aberdeen Emerging vs. Aberdeen Gbl Eq |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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