Correlation Between Ford and Pinnacle Sherman
Can any of the company-specific risk be diversified away by investing in both Ford and Pinnacle Sherman 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 Pinnacle Sherman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Pinnacle Sherman Multi Strategy, you can compare the effects of market volatilities on Ford and Pinnacle Sherman 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 Pinnacle Sherman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Pinnacle Sherman.
Diversification Opportunities for Ford and Pinnacle Sherman
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Pinnacle is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Pinnacle Sherman Multi Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Sherman Multi 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 Pinnacle Sherman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Sherman Multi has no effect on the direction of Ford i.e., Ford and Pinnacle Sherman go up and down completely randomly.
Pair Corralation between Ford and Pinnacle Sherman
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.23 times more return on investment than Pinnacle Sherman. However, Ford is 2.23 times more volatile than Pinnacle Sherman Multi Strategy. It trades about 0.19 of its potential returns per unit of risk. Pinnacle Sherman Multi Strategy is currently generating about 0.33 per unit of risk. If you would invest 1,027 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 83.00 from holding Ford Motor or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ford Motor vs. Pinnacle Sherman Multi Strateg
Performance |
| Timeline |
| Ford Motor |
| Pinnacle Sherman Multi |
Ford and Pinnacle Sherman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Pinnacle Sherman
The main advantage of trading using opposite Ford and Pinnacle Sherman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Pinnacle Sherman 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 Pinnacle Sherman will offset losses from the drop in Pinnacle Sherman's long position.The idea behind Ford Motor and Pinnacle Sherman Multi Strategy 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.| Pinnacle Sherman vs. Eip Growth And | Pinnacle Sherman vs. Growth Fund Of | Pinnacle Sherman vs. Ancorathelen Small Mid Cap | Pinnacle Sherman vs. Small Midcap Dividend Income |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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