Correlation Between Ford and Holland Colours
Can any of the company-specific risk be diversified away by investing in both Ford and Holland Colours 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 Holland Colours into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Holland Colours NV, you can compare the effects of market volatilities on Ford and Holland Colours 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 Holland Colours. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Holland Colours.
Diversification Opportunities for Ford and Holland Colours
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Holland is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Holland Colours NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holland Colours NV 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 Holland Colours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holland Colours NV has no effect on the direction of Ford i.e., Ford and Holland Colours go up and down completely randomly.
Pair Corralation between Ford and Holland Colours
Taking into account the 90-day investment horizon Ford is expected to generate 1.02 times less return on investment than Holland Colours. In addition to that, Ford is 1.02 times more volatile than Holland Colours NV. It trades about 0.03 of its total potential returns per unit of risk. Holland Colours NV is currently generating about 0.03 per unit of volatility. If you would invest 8,190 in Holland Colours NV on September 2, 2024 and sell it today you would earn a total of 910.00 from holding Holland Colours NV or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Ford Motor vs. Holland Colours NV
Performance |
| Timeline |
| Ford Motor |
| Holland Colours NV |
Ford and Holland Colours Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Holland Colours
The main advantage of trading using opposite Ford and Holland Colours positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Holland Colours 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 Holland Colours will offset losses from the drop in Holland Colours' long position.The idea behind Ford Motor and Holland Colours NV 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.| Holland Colours vs. NV Nederlandsche Apparatenfabriek | Holland Colours vs. Hydratec Industries NV | Holland Colours vs. Amsterdam Commodities NV | Holland Colours vs. Aalberts Industries NV |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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