Correlation Between Ford and Legrand SA
Can any of the company-specific risk be diversified away by investing in both Ford and Legrand SA 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 Legrand SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Legrand SA ADR, you can compare the effects of market volatilities on Ford and Legrand SA 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 Legrand SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Legrand SA.
Diversification Opportunities for Ford and Legrand SA
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Legrand is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Legrand SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand SA ADR 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 Legrand SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legrand SA ADR has no effect on the direction of Ford i.e., Ford and Legrand SA go up and down completely randomly.
Pair Corralation between Ford and Legrand SA
Taking into account the 90-day investment horizon Ford is expected to generate 7.88 times less return on investment than Legrand SA. In addition to that, Ford is 1.13 times more volatile than Legrand SA ADR. It trades about 0.04 of its total potential returns per unit of risk. Legrand SA ADR is currently generating about 0.33 per unit of volatility. If you would invest 1,968 in Legrand SA ADR on October 26, 2024 and sell it today you would earn a total of 179.00 from holding Legrand SA ADR or generate 9.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Legrand SA ADR
Performance |
| Timeline |
| Ford Motor |
| Legrand SA ADR |
Ford and Legrand SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Legrand SA
The main advantage of trading using opposite Ford and Legrand SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Legrand SA 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 Legrand SA will offset losses from the drop in Legrand SA's long position.The idea behind Ford Motor and Legrand SA ADR 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.| Legrand SA vs. AFC Energy plc | Legrand SA vs. Loop Energy | Legrand SA vs. Sunrise New Energy | Legrand SA vs. Signify NV |
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 CEOs Directory module to screen CEOs from public companies around the world.
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