Correlation Between Ford and Century Therapeutics
Can any of the company-specific risk be diversified away by investing in both Ford and Century Therapeutics 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 Century Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Century Therapeutics, you can compare the effects of market volatilities on Ford and Century Therapeutics 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 Century Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Century Therapeutics.
Diversification Opportunities for Ford and Century Therapeutics
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Century is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Century Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Therapeutics 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 Century Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Therapeutics has no effect on the direction of Ford i.e., Ford and Century Therapeutics go up and down completely randomly.
Pair Corralation between Ford and Century Therapeutics
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.54 times more return on investment than Century Therapeutics. However, Ford Motor is 1.86 times less risky than Century Therapeutics. It trades about 0.16 of its potential returns per unit of risk. Century Therapeutics is currently generating about -0.31 per unit of risk. If you would invest 965.00 in Ford Motor on November 2, 2024 and sell it today you would earn a total of 51.00 from holding Ford Motor or generate 5.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Century Therapeutics
Performance |
| Timeline |
| Ford Motor |
| Century Therapeutics |
Ford and Century Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Century Therapeutics
The main advantage of trading using opposite Ford and Century Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Century Therapeutics 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 Century Therapeutics will offset losses from the drop in Century Therapeutics' long position.The idea behind Ford Motor and Century Therapeutics 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.| Century Therapeutics vs. Edgewise Therapeutics | Century Therapeutics vs. C4 Therapeutics | Century Therapeutics vs. Mineralys Therapeutics, Common | Century Therapeutics vs. Cullinan Oncology LLC |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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