Correlation Between Ford and LianDi Clean
Can any of the company-specific risk be diversified away by investing in both Ford and LianDi Clean 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 LianDi Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and LianDi Clean Technology, you can compare the effects of market volatilities on Ford and LianDi Clean 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 LianDi Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and LianDi Clean.
Diversification Opportunities for Ford and LianDi Clean
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and LianDi is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and LianDi Clean Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LianDi Clean Technology 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 LianDi Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LianDi Clean Technology has no effect on the direction of Ford i.e., Ford and LianDi Clean go up and down completely randomly.
Pair Corralation between Ford and LianDi Clean
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.15 times more return on investment than LianDi Clean. However, Ford Motor is 6.51 times less risky than LianDi Clean. It trades about 0.06 of its potential returns per unit of risk. LianDi Clean Technology is currently generating about -0.22 per unit of risk. If you would invest 992.00 in Ford Motor on November 5, 2024 and sell it today you would earn a total of 16.00 from holding Ford Motor or generate 1.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Ford Motor vs. LianDi Clean Technology
Performance |
| Timeline |
| Ford Motor |
| LianDi Clean Technology |
Ford and LianDi Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and LianDi Clean
The main advantage of trading using opposite Ford and LianDi Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, LianDi Clean 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 LianDi Clean will offset losses from the drop in LianDi Clean's long position.The idea behind Ford Motor and LianDi Clean Technology 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.| LianDi Clean vs. Enerflex | LianDi Clean vs. Natural Gas Services | LianDi Clean vs. Archrock | LianDi Clean vs. Geospace Technologies |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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