Correlation Between Ford and ISFELAG HF
Can any of the company-specific risk be diversified away by investing in both Ford and ISFELAG HF 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 ISFELAG HF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and ISFELAG HF, you can compare the effects of market volatilities on Ford and ISFELAG HF 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 ISFELAG HF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and ISFELAG HF.
Diversification Opportunities for Ford and ISFELAG HF
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and ISFELAG is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ISFELAG HF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISFELAG HF 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 ISFELAG HF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISFELAG HF has no effect on the direction of Ford i.e., Ford and ISFELAG HF go up and down completely randomly.
Pair Corralation between Ford and ISFELAG HF
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.88 times more return on investment than ISFELAG HF. However, Ford is 2.88 times more volatile than ISFELAG HF. It trades about 0.23 of its potential returns per unit of risk. ISFELAG HF is currently generating about 0.1 per unit of risk. If you would invest 1,015 in Ford Motor on September 1, 2024 and sell it today you would earn a total of 98.00 from holding Ford Motor or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. ISFELAG HF
Performance |
| Timeline |
| Ford Motor |
| ISFELAG HF |
Ford and ISFELAG HF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and ISFELAG HF
The main advantage of trading using opposite Ford and ISFELAG HF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, ISFELAG HF 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 ISFELAG HF will offset losses from the drop in ISFELAG HF's long position.The idea behind Ford Motor and ISFELAG HF 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.| ISFELAG HF vs. Kvika banki hf | ISFELAG HF vs. Icelandair Group hf | ISFELAG HF vs. slandsbanki hf | ISFELAG HF vs. Alvotech |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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