Correlation Between Ford and Know Labs
Can any of the company-specific risk be diversified away by investing in both Ford and Know Labs 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 Know Labs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Know Labs, you can compare the effects of market volatilities on Ford and Know Labs 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 Know Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Know Labs.
Diversification Opportunities for Ford and Know Labs
Very weak diversification
The 3 months correlation between Ford and Know is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Know Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Know Labs 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 Know Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Know Labs has no effect on the direction of Ford i.e., Ford and Know Labs go up and down completely randomly.
Pair Corralation between Ford and Know Labs
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.32 times more return on investment than Know Labs. However, Ford Motor is 3.16 times less risky than Know Labs. It trades about -0.02 of its potential returns per unit of risk. Know Labs is currently generating about -0.07 per unit of risk. If you would invest 1,196 in Ford Motor on November 3, 2024 and sell it today you would lose (188.00) from holding Ford Motor or give up 15.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Ford Motor vs. Know Labs
Performance |
| Timeline |
| Ford Motor |
| Know Labs |
Ford and Know Labs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Know Labs
The main advantage of trading using opposite Ford and Know Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Know Labs 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 Know Labs will offset losses from the drop in Know Labs' long position.The idea behind Ford Motor and Know Labs 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.| Know Labs vs. Wearable Devices | Know Labs vs. Yoshiharu Global Co | Know Labs vs. bioAffinity Technologies, | Know Labs vs. Jianzhi Education Technology |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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