Correlation Between Ford and 1812 Brewing
Can any of the company-specific risk be diversified away by investing in both Ford and 1812 Brewing 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 1812 Brewing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and 1812 Brewing, you can compare the effects of market volatilities on Ford and 1812 Brewing 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 1812 Brewing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and 1812 Brewing.
Diversification Opportunities for Ford and 1812 Brewing
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and 1812 is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and 1812 Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1812 Brewing 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 1812 Brewing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1812 Brewing has no effect on the direction of Ford i.e., Ford and 1812 Brewing go up and down completely randomly.
Pair Corralation between Ford and 1812 Brewing
Taking into account the 90-day investment horizon Ford is expected to generate 477.21 times less return on investment than 1812 Brewing. But when comparing it to its historical volatility, Ford Motor is 207.14 times less risky than 1812 Brewing. It trades about 0.18 of its potential returns per unit of risk. 1812 Brewing is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 0.01 in 1812 Brewing on August 31, 2024 and sell it today you would earn a total of 0.00 from holding 1812 Brewing or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ford Motor vs. 1812 Brewing
Performance |
| Timeline |
| Ford Motor |
| 1812 Brewing |
Ford and 1812 Brewing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and 1812 Brewing
The main advantage of trading using opposite Ford and 1812 Brewing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, 1812 Brewing 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 1812 Brewing will offset losses from the drop in 1812 Brewing's long position.The idea behind Ford Motor and 1812 Brewing 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.| 1812 Brewing vs. Blackhawk Growth Corp | 1812 Brewing vs. Guardian Capital Group | 1812 Brewing vs. Flow Capital Corp | 1812 Brewing vs. Princeton Capital |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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