Correlation Between Ford and LBG Media
Can any of the company-specific risk be diversified away by investing in both Ford and LBG Media 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 LBG Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and LBG Media PLC, you can compare the effects of market volatilities on Ford and LBG Media 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 LBG Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and LBG Media.
Diversification Opportunities for Ford and LBG Media
Very good diversification
The 3 months correlation between Ford and LBG is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and LBG Media PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBG Media PLC 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 LBG Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LBG Media PLC has no effect on the direction of Ford i.e., Ford and LBG Media go up and down completely randomly.
Pair Corralation between Ford and LBG Media
Taking into account the 90-day investment horizon Ford is expected to generate 2.49 times less return on investment than LBG Media. But when comparing it to its historical volatility, Ford Motor is 1.13 times less risky than LBG Media. It trades about 0.01 of its potential returns per unit of risk. LBG Media PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 11,300 in LBG Media PLC on August 27, 2024 and sell it today you would earn a total of 2,000 from holding LBG Media PLC or generate 17.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.56% |
| Values | Daily Returns |
Ford Motor vs. LBG Media PLC
Performance |
| Timeline |
| Ford Motor |
| LBG Media PLC |
Ford and LBG Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and LBG Media
The main advantage of trading using opposite Ford and LBG Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, LBG Media 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 LBG Media will offset losses from the drop in LBG Media's long position.The idea behind Ford Motor and LBG Media PLC 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.| LBG Media vs. SupplyMe Capital PLC | LBG Media vs. SM Energy Co | LBG Media vs. FuelCell Energy | LBG Media vs. Grand Vision Media |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |