Correlation Between Ford and Champion Pacific
Can any of the company-specific risk be diversified away by investing in both Ford and Champion Pacific 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 Champion Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Champion Pacific Indonesia, you can compare the effects of market volatilities on Ford and Champion Pacific 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 Champion Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Champion Pacific.
Diversification Opportunities for Ford and Champion Pacific
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Champion is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Champion Pacific Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Pacific Ind 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 Champion Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Pacific Ind has no effect on the direction of Ford i.e., Ford and Champion Pacific go up and down completely randomly.
Pair Corralation between Ford and Champion Pacific
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.32 times more return on investment than Champion Pacific. However, Ford is 2.32 times more volatile than Champion Pacific Indonesia. It trades about 0.05 of its potential returns per unit of risk. Champion Pacific Indonesia is currently generating about 0.03 per unit of risk. If you would invest 1,089 in Ford Motor on August 28, 2024 and sell it today you would earn a total of 51.00 from holding Ford Motor or generate 4.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Champion Pacific Indonesia
Performance |
| Timeline |
| Ford Motor |
| Champion Pacific Ind |
Ford and Champion Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Champion Pacific
The main advantage of trading using opposite Ford and Champion Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Champion Pacific 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 Champion Pacific will offset losses from the drop in Champion Pacific's long position.The idea behind Ford Motor and Champion Pacific Indonesia 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.| Champion Pacific vs. Intanwijaya Internasional Tbk | Champion Pacific vs. Asiaplast Industries Tbk | Champion Pacific vs. Trias Sentosa Tbk | Champion Pacific vs. Lotte Chemical Titan |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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