Correlation Between Ford and Shoprite Holdings
Can any of the company-specific risk be diversified away by investing in both Ford and Shoprite Holdings 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 Shoprite Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Shoprite Holdings Limited, you can compare the effects of market volatilities on Ford and Shoprite Holdings 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 Shoprite Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Shoprite Holdings.
Diversification Opportunities for Ford and Shoprite Holdings
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and Shoprite is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Shoprite Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite Holdings 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 Shoprite Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoprite Holdings has no effect on the direction of Ford i.e., Ford and Shoprite Holdings go up and down completely randomly.
Pair Corralation between Ford and Shoprite Holdings
Taking into account the 90-day investment horizon Ford is expected to generate 16.85 times less return on investment than Shoprite Holdings. But when comparing it to its historical volatility, Ford Motor is 1.65 times less risky than Shoprite Holdings. It trades about 0.01 of its potential returns per unit of risk. Shoprite Holdings Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 360.00 in Shoprite Holdings Limited on September 3, 2024 and sell it today you would earn a total of 1,190 from holding Shoprite Holdings Limited or generate 330.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.02% |
| Values | Daily Returns |
Ford Motor vs. Shoprite Holdings Limited
Performance |
| Timeline |
| Ford Motor |
| Shoprite Holdings |
Ford and Shoprite Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Shoprite Holdings
The main advantage of trading using opposite Ford and Shoprite Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Shoprite Holdings 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 Shoprite Holdings will offset losses from the drop in Shoprite Holdings' long position.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. Ford Motor |
| Shoprite Holdings vs. LION ONE METALS | Shoprite Holdings vs. Zijin Mining Group | Shoprite Holdings vs. Nucletron Electronic Aktiengesellschaft | Shoprite Holdings vs. METHODE ELECTRONICS |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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