Correlation Between Ford and HONEYWELL CDR
Can any of the company-specific risk be diversified away by investing in both Ford and HONEYWELL CDR 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 HONEYWELL CDR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and HONEYWELL CDR, you can compare the effects of market volatilities on Ford and HONEYWELL CDR 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 HONEYWELL CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and HONEYWELL CDR.
Diversification Opportunities for Ford and HONEYWELL CDR
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and HONEYWELL is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and HONEYWELL CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL CDR 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 HONEYWELL CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HONEYWELL CDR has no effect on the direction of Ford i.e., Ford and HONEYWELL CDR go up and down completely randomly.
Pair Corralation between Ford and HONEYWELL CDR
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.21 times more return on investment than HONEYWELL CDR. However, Ford is 1.21 times more volatile than HONEYWELL CDR. It trades about 0.07 of its potential returns per unit of risk. HONEYWELL CDR is currently generating about -0.03 per unit of risk. If you would invest 988.00 in Ford Motor on November 4, 2024 and sell it today you would earn a total of 20.00 from holding Ford Motor or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Ford Motor vs. HONEYWELL CDR
Performance |
| Timeline |
| Ford Motor |
| HONEYWELL CDR |
Ford and HONEYWELL CDR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and HONEYWELL CDR
The main advantage of trading using opposite Ford and HONEYWELL CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, HONEYWELL CDR 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 HONEYWELL CDR will offset losses from the drop in HONEYWELL CDR's long position.The idea behind Ford Motor and HONEYWELL CDR 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.| HONEYWELL CDR vs. Fairfax Financial Holdings | HONEYWELL CDR vs. Fairfax Financial Holdings | HONEYWELL CDR vs. Fairfax Financial Holdings | HONEYWELL CDR vs. Fairfax Financial Holdings |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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