Correlation Between Ford and Main Street
Can any of the company-specific risk be diversified away by investing in both Ford and Main Street 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 Main Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Main Street Capital, you can compare the effects of market volatilities on Ford and Main Street 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 Main Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Main Street.
Diversification Opportunities for Ford and Main Street
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and Main is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Main Street Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Street Capital 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 Main Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Street Capital has no effect on the direction of Ford i.e., Ford and Main Street go up and down completely randomly.
Pair Corralation between Ford and Main Street
Taking into account the 90-day investment horizon Ford is expected to generate 86.6 times less return on investment than Main Street. In addition to that, Ford is 2.32 times more volatile than Main Street Capital. It trades about 0.0 of its total potential returns per unit of risk. Main Street Capital is currently generating about 0.14 per unit of volatility. If you would invest 3,301 in Main Street Capital on November 1, 2024 and sell it today you would earn a total of 2,829 from holding Main Street Capital or generate 85.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Ford Motor vs. Main Street Capital
Performance |
| Timeline |
| Ford Motor |
| Main Street Capital |
Ford and Main Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Main Street
The main advantage of trading using opposite Ford and Main Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Main Street 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 Main Street will offset losses from the drop in Main Street's long position.The idea behind Ford Motor and Main Street Capital 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.| Main Street vs. Gladstone Capital | Main Street vs. PennantPark Floating Rate | Main Street vs. Horizon Technology Finance | Main Street vs. Prospect Capital |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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