Correlation Between Ford and J Sainsbury
Can any of the company-specific risk be diversified away by investing in both Ford and J Sainsbury 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 J Sainsbury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and J Sainsbury PLC, you can compare the effects of market volatilities on Ford and J Sainsbury 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 J Sainsbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and J Sainsbury.
Diversification Opportunities for Ford and J Sainsbury
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and JSAIY is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and J Sainsbury PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Sainsbury PLC 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 J Sainsbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Sainsbury PLC has no effect on the direction of Ford i.e., Ford and J Sainsbury go up and down completely randomly.
Pair Corralation between Ford and J Sainsbury
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.55 times more return on investment than J Sainsbury. However, Ford is 1.55 times more volatile than J Sainsbury PLC. It trades about 0.05 of its potential returns per unit of risk. J Sainsbury PLC is currently generating about 0.03 per unit of risk. If you would invest 899.00 in Ford Motor on August 24, 2024 and sell it today you would earn a total of 219.00 from holding Ford Motor or generate 24.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. J Sainsbury PLC
Performance |
| Timeline |
| Ford Motor |
| J Sainsbury PLC |
Ford and J Sainsbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and J Sainsbury
The main advantage of trading using opposite Ford and J Sainsbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, J Sainsbury 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 J Sainsbury will offset losses from the drop in J Sainsbury's long position.The idea behind Ford Motor and J Sainsbury PLC 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.| J Sainsbury vs. Kesko Oyj ADR | J Sainsbury vs. Om Holdings International | J Sainsbury vs. Tesco PLC | J Sainsbury vs. Carrefour SA |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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