Correlation Between Ford and Logility Supply
Can any of the company-specific risk be diversified away by investing in both Ford and Logility Supply 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 Logility Supply into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Logility Supply Chain, you can compare the effects of market volatilities on Ford and Logility Supply 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 Logility Supply. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Logility Supply.
Diversification Opportunities for Ford and Logility Supply
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Logility is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Logility Supply Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logility Supply Chain 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 Logility Supply. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logility Supply Chain has no effect on the direction of Ford i.e., Ford and Logility Supply go up and down completely randomly.
Pair Corralation between Ford and Logility Supply
Taking into account the 90-day investment horizon Ford is expected to generate 5.97 times less return on investment than Logility Supply. But when comparing it to its historical volatility, Ford Motor is 3.27 times less risky than Logility Supply. It trades about 0.13 of its potential returns per unit of risk. Logility Supply Chain is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,100 in Logility Supply Chain on November 3, 2024 and sell it today you would earn a total of 312.00 from holding Logility Supply Chain or generate 28.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Logility Supply Chain
Performance |
| Timeline |
| Ford Motor |
| Logility Supply Chain |
Ford and Logility Supply Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Logility Supply
The main advantage of trading using opposite Ford and Logility Supply positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Logility Supply 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 Logility Supply will offset losses from the drop in Logility Supply's long position.The idea behind Ford Motor and Logility Supply Chain 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.| Logility Supply vs. Commonwealth Bank of | Logility Supply vs. Philip Morris International | Logility Supply vs. Molson Coors Brewing | Logility Supply vs. Altria 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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