Correlation Between Ford and KC Metalsheet
Can any of the company-specific risk be diversified away by investing in both Ford and KC Metalsheet 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 KC Metalsheet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and KC Metalsheet Public, you can compare the effects of market volatilities on Ford and KC Metalsheet 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 KC Metalsheet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and KC Metalsheet.
Diversification Opportunities for Ford and KC Metalsheet
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and KCM is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and KC Metalsheet Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KC Metalsheet Public 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 KC Metalsheet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KC Metalsheet Public has no effect on the direction of Ford i.e., Ford and KC Metalsheet go up and down completely randomly.
Pair Corralation between Ford and KC Metalsheet
Taking into account the 90-day investment horizon Ford is expected to generate 359.11 times less return on investment than KC Metalsheet. But when comparing it to its historical volatility, Ford Motor is 31.46 times less risky than KC Metalsheet. It trades about 0.01 of its potential returns per unit of risk. KC Metalsheet Public is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 39.00 in KC Metalsheet Public on August 25, 2024 and sell it today you would lose (9.00) from holding KC Metalsheet Public or give up 23.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.79% |
| Values | Daily Returns |
Ford Motor vs. KC Metalsheet Public
Performance |
| Timeline |
| Ford Motor |
| KC Metalsheet Public |
Ford and KC Metalsheet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and KC Metalsheet
The main advantage of trading using opposite Ford and KC Metalsheet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, KC Metalsheet 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 KC Metalsheet will offset losses from the drop in KC Metalsheet's long position.The idea behind Ford Motor and KC Metalsheet Public 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.| KC Metalsheet vs. Masterkool International Public | KC Metalsheet vs. Kingsmen CMTI Public | KC Metalsheet vs. Hydrotek Public | KC Metalsheet vs. Home Pottery Public |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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