Correlation Between Ford and Geospace Technologies
Can any of the company-specific risk be diversified away by investing in both Ford and Geospace Technologies 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 Geospace Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Geospace Technologies, you can compare the effects of market volatilities on Ford and Geospace Technologies 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 Geospace Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Geospace Technologies.
Diversification Opportunities for Ford and Geospace Technologies
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Geospace is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Geospace Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geospace Technologies 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 Geospace Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geospace Technologies has no effect on the direction of Ford i.e., Ford and Geospace Technologies go up and down completely randomly.
Pair Corralation between Ford and Geospace Technologies
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Geospace Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.5 times less risky than Geospace Technologies. The stock trades about 0.0 of its potential returns per unit of risk. The Geospace Technologies is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,125 in Geospace Technologies on August 24, 2024 and sell it today you would earn a total of 237.00 from holding Geospace Technologies or generate 21.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Geospace Technologies
Performance |
| Timeline |
| Ford Motor |
| Geospace Technologies |
Ford and Geospace Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Geospace Technologies
The main advantage of trading using opposite Ford and Geospace Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Geospace Technologies 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 Geospace Technologies will offset losses from the drop in Geospace Technologies' long position.The idea behind Ford Motor and Geospace Technologies 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.| Geospace Technologies vs. Enerflex | Geospace Technologies vs. Oil States International | Geospace Technologies vs. Newpark Resources | Geospace Technologies vs. MRC Global |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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