Correlation Between Ford and JetBlue Airways
Can any of the company-specific risk be diversified away by investing in both Ford and JetBlue Airways 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 JetBlue Airways into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and JetBlue Airways, you can compare the effects of market volatilities on Ford and JetBlue Airways 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 JetBlue Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and JetBlue Airways.
Diversification Opportunities for Ford and JetBlue Airways
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and JetBlue is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and JetBlue Airways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JetBlue Airways 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 JetBlue Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JetBlue Airways has no effect on the direction of Ford i.e., Ford and JetBlue Airways go up and down completely randomly.
Pair Corralation between Ford and JetBlue Airways
Taking into account the 90-day investment horizon Ford is expected to generate 1.02 times less return on investment than JetBlue Airways. But when comparing it to its historical volatility, Ford Motor is 1.69 times less risky than JetBlue Airways. It trades about 0.01 of its potential returns per unit of risk. JetBlue Airways is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 15,000 in JetBlue Airways on August 24, 2024 and sell it today you would lose (3,312) from holding JetBlue Airways or give up 22.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. JetBlue Airways
Performance |
| Timeline |
| Ford Motor |
| JetBlue Airways |
Ford and JetBlue Airways Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and JetBlue Airways
The main advantage of trading using opposite Ford and JetBlue Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, JetBlue Airways 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 JetBlue Airways will offset losses from the drop in JetBlue Airways' long position.The idea behind Ford Motor and JetBlue Airways 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.| JetBlue Airways vs. United Airlines Holdings | JetBlue Airways vs. Applied Materials | JetBlue Airways vs. Southern Copper | JetBlue Airways vs. Cognizant Technology Solutions |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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