Correlation Between Ford and Imperial Petroleum
Can any of the company-specific risk be diversified away by investing in both Ford and Imperial Petroleum 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 Imperial Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Imperial Petroleum Preferred, you can compare the effects of market volatilities on Ford and Imperial Petroleum 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 Imperial Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Imperial Petroleum.
Diversification Opportunities for Ford and Imperial Petroleum
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Imperial is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Imperial Petroleum Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Petroleum 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 Imperial Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Petroleum has no effect on the direction of Ford i.e., Ford and Imperial Petroleum go up and down completely randomly.
Pair Corralation between Ford and Imperial Petroleum
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.96 times more return on investment than Imperial Petroleum. However, Ford is 2.96 times more volatile than Imperial Petroleum Preferred. It trades about 0.17 of its potential returns per unit of risk. Imperial Petroleum Preferred is currently generating about 0.21 per unit of risk. If you would invest 1,033 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 77.00 from holding Ford Motor or generate 7.45% 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. Imperial Petroleum Preferred
Performance |
| Timeline |
| Ford Motor |
| Imperial Petroleum |
Ford and Imperial Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Imperial Petroleum
The main advantage of trading using opposite Ford and Imperial Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Imperial Petroleum 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 Imperial Petroleum will offset losses from the drop in Imperial Petroleum's long position.The idea behind Ford Motor and Imperial Petroleum Preferred 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.| Imperial Petroleum vs. Imperial Petroleum | Imperial Petroleum vs. Dynagas LNG Partners | Imperial Petroleum vs. GasLog Partners LP | Imperial Petroleum vs. GasLog Partners LP |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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