Correlation Between Ford and Stone Ridge
Can any of the company-specific risk be diversified away by investing in both Ford and Stone Ridge 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 Stone Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Stone Ridge 2052, you can compare the effects of market volatilities on Ford and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Stone Ridge.
Diversification Opportunities for Ford and Stone Ridge
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Stone is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Stone Ridge 2052 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge 2052 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge 2052 has no effect on the direction of Ford i.e., Ford and Stone Ridge go up and down completely randomly.
Pair Corralation between Ford and Stone Ridge
Taking into account the 90-day investment horizon Ford Motor is expected to generate 5.46 times more return on investment than Stone Ridge. However, Ford is 5.46 times more volatile than Stone Ridge 2052. It trades about 0.03 of its potential returns per unit of risk. Stone Ridge 2052 is currently generating about -0.23 per unit of risk. If you would invest 990.00 in Ford Motor on August 25, 2024 and sell it today you would earn a total of 128.00 from holding Ford Motor or generate 12.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 20.4% |
| Values | Daily Returns |
Ford Motor vs. Stone Ridge 2052
Performance |
| Timeline |
| Ford Motor |
| Stone Ridge 2052 |
Ford and Stone Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Stone Ridge
The main advantage of trading using opposite Ford and Stone Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Stone Ridge 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 Stone Ridge will offset losses from the drop in Stone Ridge's long position.The idea behind Ford Motor and Stone Ridge 2052 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.| Stone Ridge vs. Simplify Volatility Premium | Stone Ridge vs. Sprott Focus Trust | Stone Ridge vs. iShares Trust | Stone Ridge vs. iShares Trust |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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