Correlation Between Ford and Irish Residential
Can any of the company-specific risk be diversified away by investing in both Ford and Irish Residential 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 Irish Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Irish Residential Properties, you can compare the effects of market volatilities on Ford and Irish Residential 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 Irish Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Irish Residential.
Diversification Opportunities for Ford and Irish Residential
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Irish is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Irish Residential Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Irish Residential 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 Irish Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Irish Residential has no effect on the direction of Ford i.e., Ford and Irish Residential go up and down completely randomly.
Pair Corralation between Ford and Irish Residential
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Irish Residential. In addition to that, Ford is 1.12 times more volatile than Irish Residential Properties. It trades about -0.23 of its total potential returns per unit of risk. Irish Residential Properties is currently generating about 0.05 per unit of volatility. If you would invest 93.00 in Irish Residential Properties on January 9, 2025 and sell it today you would earn a total of 2.00 from holding Irish Residential Properties or generate 2.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ford Motor vs. Irish Residential Properties
Performance |
| Timeline |
| Ford Motor |
| Irish Residential |
Ford and Irish Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Irish Residential
The main advantage of trading using opposite Ford and Irish Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Irish Residential 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 Irish Residential will offset losses from the drop in Irish Residential's long position.The idea behind Ford Motor and Irish Residential Properties 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.| Irish Residential vs. Dalata Hotel Group | Irish Residential vs. Bank of Ireland | Irish Residential vs. Kingspan Group plc | Irish Residential vs. Irish Continental Group |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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