Correlation Between Ford and GI Group
Can any of the company-specific risk be diversified away by investing in both Ford and GI Group 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 GI Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and GI Group Poland, you can compare the effects of market volatilities on Ford and GI Group 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 GI Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and GI Group.
Diversification Opportunities for Ford and GI Group
Good diversification
The 3 months correlation between Ford and GIG is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and GI Group Poland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GI Group Poland 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 GI Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GI Group Poland has no effect on the direction of Ford i.e., Ford and GI Group go up and down completely randomly.
Pair Corralation between Ford and GI Group
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.4 times more return on investment than GI Group. However, Ford is 1.4 times more volatile than GI Group Poland. It trades about 0.04 of its potential returns per unit of risk. GI Group Poland is currently generating about -0.08 per unit of risk. If you would invest 1,122 in Ford Motor on August 28, 2024 and sell it today you would earn a total of 18.00 from holding Ford Motor or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Ford Motor vs. GI Group Poland
Performance |
| Timeline |
| Ford Motor |
| GI Group Poland |
Ford and GI Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and GI Group
The main advantage of trading using opposite Ford and GI Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, GI Group 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 GI Group will offset losses from the drop in GI Group's long position.The idea behind Ford Motor and GI Group Poland 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.| GI Group vs. LSI Software SA | GI Group vs. ING Bank lski | GI Group vs. BNP Paribas Bank | GI Group vs. Centrum Finansowe Banku |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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