Correlation Between Ford and KCI SA
Can any of the company-specific risk be diversified away by investing in both Ford and KCI SA 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 KCI SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and KCI SA, you can compare the effects of market volatilities on Ford and KCI SA 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 KCI SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and KCI SA.
Diversification Opportunities for Ford and KCI SA
Significant diversification
The 3 months correlation between Ford and KCI is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and KCI SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCI SA 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 KCI SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCI SA has no effect on the direction of Ford i.e., Ford and KCI SA go up and down completely randomly.
Pair Corralation between Ford and KCI SA
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.86 times more return on investment than KCI SA. However, Ford is 1.86 times more volatile than KCI SA. It trades about 0.19 of its potential returns per unit of risk. KCI SA is currently generating about 0.01 per unit of risk. If you would invest 1,027 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 83.00 from holding Ford Motor or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Ford Motor vs. KCI SA
Performance |
| Timeline |
| Ford Motor |
| KCI SA |
Ford and KCI SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and KCI SA
The main advantage of trading using opposite Ford and KCI SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, KCI SA 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 KCI SA will offset losses from the drop in KCI SA's long position.The idea behind Ford Motor and KCI SA 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.| KCI SA vs. Dom Development SA | KCI SA vs. Tower Investments SA | KCI SA vs. Asseco Business Solutions | KCI SA vs. Detalion Games 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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