Correlation Between Ford and BetaPro Canadian
Can any of the company-specific risk be diversified away by investing in both Ford and BetaPro Canadian 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 BetaPro Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BetaPro Canadian Gold, you can compare the effects of market volatilities on Ford and BetaPro Canadian 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 BetaPro Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BetaPro Canadian.
Diversification Opportunities for Ford and BetaPro Canadian
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and BetaPro is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BetaPro Canadian Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro Canadian Gold 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 BetaPro Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro Canadian Gold has no effect on the direction of Ford i.e., Ford and BetaPro Canadian go up and down completely randomly.
Pair Corralation between Ford and BetaPro Canadian
Taking into account the 90-day investment horizon Ford is expected to generate 12.1 times less return on investment than BetaPro Canadian. But when comparing it to its historical volatility, Ford Motor is 1.6 times less risky than BetaPro Canadian. It trades about 0.01 of its potential returns per unit of risk. BetaPro Canadian Gold is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,622 in BetaPro Canadian Gold on October 21, 2024 and sell it today you would earn a total of 741.00 from holding BetaPro Canadian Gold or generate 45.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. BetaPro Canadian Gold
Performance |
| Timeline |
| Ford Motor |
| BetaPro Canadian Gold |
Ford and BetaPro Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BetaPro Canadian
The main advantage of trading using opposite Ford and BetaPro Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, BetaPro Canadian 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 BetaPro Canadian will offset losses from the drop in BetaPro Canadian's long position.The idea behind Ford Motor and BetaPro Canadian Gold 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.| BetaPro Canadian vs. BetaPro Gold Bullion | BetaPro Canadian vs. BetaPro NASDAQ 100 2x | BetaPro Canadian vs. BetaPro SP TSX | BetaPro Canadian vs. BetaPro SP TSX |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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