Correlation Between Ford and Leef Brands
Can any of the company-specific risk be diversified away by investing in both Ford and Leef Brands 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 Leef Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Leef Brands, you can compare the effects of market volatilities on Ford and Leef Brands 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 Leef Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Leef Brands.
Diversification Opportunities for Ford and Leef Brands
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Leef is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Leef Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leef Brands 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 Leef Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leef Brands has no effect on the direction of Ford i.e., Ford and Leef Brands go up and down completely randomly.
Pair Corralation between Ford and Leef Brands
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Leef Brands. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 5.22 times less risky than Leef Brands. The stock trades about -0.32 of its potential returns per unit of risk. The Leef Brands is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 14.00 in Leef Brands on September 18, 2024 and sell it today you would earn a total of 3.00 from holding Leef Brands or generate 21.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Ford Motor vs. Leef Brands
Performance |
| Timeline |
| Ford Motor |
| Leef Brands |
Ford and Leef Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Leef Brands
The main advantage of trading using opposite Ford and Leef Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Leef Brands 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 Leef Brands will offset losses from the drop in Leef Brands' long position.The idea behind Ford Motor and Leef Brands 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.| Leef Brands vs. Copa Holdings SA | Leef Brands vs. United Airlines Holdings | Leef Brands vs. Delta Air Lines | Leef Brands vs. SkyWest |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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