Correlation Between Ford and Life On
Can any of the company-specific risk be diversified away by investing in both Ford and Life On 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 Life On into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Life On Earth, you can compare the effects of market volatilities on Ford and Life On 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 Life On. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Life On.
Diversification Opportunities for Ford and Life On
Weak diversification
The 3 months correlation between Ford and Life is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Life On Earth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life On Earth 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 Life On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life On Earth has no effect on the direction of Ford i.e., Ford and Life On go up and down completely randomly.
Pair Corralation between Ford and Life On
If you would invest 0.03 in Life On Earth on October 23, 2024 and sell it today you would earn a total of 0.00 from holding Life On Earth or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 2.63% |
| Values | Daily Returns |
Ford Motor vs. Life On Earth
Performance |
| Timeline |
| Ford Motor |
| Life On Earth |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Life On Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Life On
The main advantage of trading using opposite Ford and Life On positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Life On 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 Life On will offset losses from the drop in Life On's long position.The idea behind Ford Motor and Life On Earth 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.| Life On vs. Colabor Group | Life On vs. Bunzl plc | Life On vs. Innovative Food Hldg | Life On vs. Performance Food Group |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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