Correlation Between Ford and Kensington Dynamic
Can any of the company-specific risk be diversified away by investing in both Ford and Kensington Dynamic 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 Kensington Dynamic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Kensington Dynamic Growth, you can compare the effects of market volatilities on Ford and Kensington Dynamic 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 Kensington Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Kensington Dynamic.
Diversification Opportunities for Ford and Kensington Dynamic
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Kensington is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Kensington Dynamic Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Dynamic Growth 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 Kensington Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Dynamic Growth has no effect on the direction of Ford i.e., Ford and Kensington Dynamic go up and down completely randomly.
Pair Corralation between Ford and Kensington Dynamic
Taking into account the 90-day investment horizon Ford is expected to generate 1.25 times less return on investment than Kensington Dynamic. In addition to that, Ford is 3.12 times more volatile than Kensington Dynamic Growth. It trades about 0.01 of its total potential returns per unit of risk. Kensington Dynamic Growth is currently generating about 0.04 per unit of volatility. If you would invest 996.00 in Kensington Dynamic Growth on September 3, 2024 and sell it today you would earn a total of 121.00 from holding Kensington Dynamic Growth or generate 12.15% 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. Kensington Dynamic Growth
Performance |
| Timeline |
| Ford Motor |
| Kensington Dynamic Growth |
Ford and Kensington Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Kensington Dynamic
The main advantage of trading using opposite Ford and Kensington Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Kensington Dynamic 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 Kensington Dynamic will offset losses from the drop in Kensington Dynamic's long position.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. ECD Automotive Design |
| Kensington Dynamic vs. Lord Abbett Emerging | Kensington Dynamic vs. Wells Fargo Funds | Kensington Dynamic vs. Elfun Government Money | Kensington Dynamic vs. Wilmington Funds |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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