Correlation Between Ford and Land
Can any of the company-specific risk be diversified away by investing in both Ford and Land 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 Land into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Land and Houses, you can compare the effects of market volatilities on Ford and Land 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 Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Land.
Diversification Opportunities for Ford and Land
Poor diversification
The 3 months correlation between Ford and Land is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Land and Houses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Land and Houses 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 Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Land and Houses has no effect on the direction of Ford i.e., Ford and Land go up and down completely randomly.
Pair Corralation between Ford and Land
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.58 times more return on investment than Land. However, Ford is 1.58 times more volatile than Land and Houses. It trades about 0.0 of its potential returns per unit of risk. Land and Houses is currently generating about -0.08 per unit of risk. If you would invest 1,211 in Ford Motor on October 24, 2024 and sell it today you would lose (193.00) from holding Ford Motor or give up 15.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.16% |
| Values | Daily Returns |
Ford Motor vs. Land and Houses
Performance |
| Timeline |
| Ford Motor |
| Land and Houses |
Ford and Land Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Land
The main advantage of trading using opposite Ford and Land positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Land 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 Land will offset losses from the drop in Land's long position.The idea behind Ford Motor and Land and Houses 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.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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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