Correlation Between Ford and Great West
Can any of the company-specific risk be diversified away by investing in both Ford and Great West 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 Great West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Great West Lifeco, you can compare the effects of market volatilities on Ford and Great West 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 Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Great West.
Diversification Opportunities for Ford and Great West
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Great is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Lifeco has no effect on the direction of Ford i.e., Ford and Great West go up and down completely randomly.
Pair Corralation between Ford and Great West
Taking into account the 90-day investment horizon Ford is expected to generate 2.53 times less return on investment than Great West. In addition to that, Ford is 3.38 times more volatile than Great West Lifeco. It trades about 0.01 of its total potential returns per unit of risk. Great West Lifeco is currently generating about 0.09 per unit of volatility. If you would invest 1,782 in Great West Lifeco on August 25, 2024 and sell it today you would earn a total of 337.00 from holding Great West Lifeco or generate 18.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.66% |
| Values | Daily Returns |
Ford Motor vs. Great West Lifeco
Performance |
| Timeline |
| Ford Motor |
| Great West Lifeco |
Ford and Great West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Great West
The main advantage of trading using opposite Ford and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Great West 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 Great West will offset losses from the drop in Great West's long position.The idea behind Ford Motor and Great West Lifeco 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.| Great West vs. Aya Gold Silver | Great West vs. Capstone Mining Corp | Great West vs. Rocky Mountain Liquor | Great West vs. Data Communications Management |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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