Correlation Between Ford and Gitlab
Can any of the company-specific risk be diversified away by investing in both Ford and Gitlab 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 Gitlab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Gitlab Inc, you can compare the effects of market volatilities on Ford and Gitlab 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 Gitlab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Gitlab.
Diversification Opportunities for Ford and Gitlab
Very weak diversification
The 3 months correlation between Ford and Gitlab is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Gitlab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gitlab Inc 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 Gitlab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gitlab Inc has no effect on the direction of Ford i.e., Ford and Gitlab go up and down completely randomly.
Pair Corralation between Ford and Gitlab
Taking into account the 90-day investment horizon Ford is expected to generate 2.15 times less return on investment than Gitlab. But when comparing it to its historical volatility, Ford Motor is 1.26 times less risky than Gitlab. It trades about 0.17 of its potential returns per unit of risk. Gitlab Inc is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 5,456 in Gitlab Inc on August 31, 2024 and sell it today you would earn a total of 924.00 from holding Gitlab Inc or generate 16.94% 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. Gitlab Inc
Performance |
| Timeline |
| Ford Motor |
| Gitlab Inc |
Ford and Gitlab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Gitlab
The main advantage of trading using opposite Ford and Gitlab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Gitlab 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 Gitlab will offset losses from the drop in Gitlab's long position.The idea behind Ford Motor and Gitlab Inc 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.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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