Correlation Between Ford and Loft II
Can any of the company-specific risk be diversified away by investing in both Ford and Loft II 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 Loft II into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Loft II Fundo, you can compare the effects of market volatilities on Ford and Loft II 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 Loft II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Loft II.
Diversification Opportunities for Ford and Loft II
Pay attention - limited upside
The 3 months correlation between Ford and Loft is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Loft II Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loft II Fundo 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 Loft II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loft II Fundo has no effect on the direction of Ford i.e., Ford and Loft II go up and down completely randomly.
Pair Corralation between Ford and Loft II
Taking into account the 90-day investment horizon Ford is expected to generate 28.98 times less return on investment than Loft II. But when comparing it to its historical volatility, Ford Motor is 1.83 times less risky than Loft II. It trades about 0.01 of its potential returns per unit of risk. Loft II Fundo is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 875.00 in Loft II Fundo on August 27, 2024 and sell it today you would earn a total of 75.00 from holding Loft II Fundo or generate 8.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Ford Motor vs. Loft II Fundo
Performance |
| Timeline |
| Ford Motor |
| Loft II Fundo |
Ford and Loft II Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Loft II
The main advantage of trading using opposite Ford and Loft II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Loft II 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 Loft II will offset losses from the drop in Loft II's long position.The idea behind Ford Motor and Loft II Fundo 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.| Loft II vs. BTG Pactual Logstica | Loft II vs. Plano Plano Desenvolvimento | Loft II vs. Companhia Habitasul de | Loft II vs. The Procter Gamble |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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