Correlation Between Ford and Mid America
Can any of the company-specific risk be diversified away by investing in both Ford and Mid America 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 Mid America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Mid America Apartment Communities, you can compare the effects of market volatilities on Ford and Mid America 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 Mid America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Mid America.
Diversification Opportunities for Ford and Mid America
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Mid is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mid America Apartment Communit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid America Apartment 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 Mid America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid America Apartment has no effect on the direction of Ford i.e., Ford and Mid America go up and down completely randomly.
Pair Corralation between Ford and Mid America
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.7 times more return on investment than Mid America. However, Ford is 1.7 times more volatile than Mid America Apartment Communities. It trades about 0.01 of its potential returns per unit of risk. Mid America Apartment Communities is currently generating about 0.02 per unit of risk. If you would invest 988.00 in Ford Motor on September 22, 2024 and sell it today you would earn a total of 0.00 from holding Ford Motor or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.83% |
| Values | Daily Returns |
Ford Motor vs. Mid America Apartment Communit
Performance |
| Timeline |
| Ford Motor |
| Mid America Apartment |
Ford and Mid America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Mid America
The main advantage of trading using opposite Ford and Mid America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Mid America 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 Mid America will offset losses from the drop in Mid America's long position.The idea behind Ford Motor and Mid America Apartment Communities 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.| Mid America vs. Equity Residential | Mid America vs. AvalonBay Communities | Mid America vs. UDR Inc | Mid America vs. INVITATION HOMES DL |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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