Correlation Between Ford and James Small
Can any of the company-specific risk be diversified away by investing in both Ford and James Small 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 James Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and James Small Cap, you can compare the effects of market volatilities on Ford and James Small 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 James Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and James Small.
Diversification Opportunities for Ford and James Small
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and James is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and James Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Small Cap 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 James Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Small Cap has no effect on the direction of Ford i.e., Ford and James Small go up and down completely randomly.
Pair Corralation between Ford and James Small
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the James Small. In addition to that, Ford is 2.24 times more volatile than James Small Cap. It trades about 0.0 of its total potential returns per unit of risk. James Small Cap is currently generating about 0.1 per unit of volatility. If you would invest 3,622 in James Small Cap on August 27, 2024 and sell it today you would earn a total of 740.00 from holding James Small Cap or generate 20.43% 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. James Small Cap
Performance |
| Timeline |
| Ford Motor |
| James Small Cap |
Ford and James Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and James Small
The main advantage of trading using opposite Ford and James Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, James Small 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 James Small will offset losses from the drop in James Small's long position.The idea behind Ford Motor and James Small Cap 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.| James Small vs. James Balanced Golden | James Small vs. Sterling Capital Stratton | James Small vs. Perritt Microcap Opportunities | James Small vs. Royce Smaller Companies Growth |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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