Correlation Between Ford and Marijuana
Can any of the company-specific risk be diversified away by investing in both Ford and Marijuana 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 Marijuana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Marijuana, you can compare the effects of market volatilities on Ford and Marijuana 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 Marijuana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Marijuana.
Diversification Opportunities for Ford and Marijuana
Pay attention - limited upside
The 3 months correlation between Ford and Marijuana is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Marijuana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marijuana 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 Marijuana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marijuana has no effect on the direction of Ford i.e., Ford and Marijuana go up and down completely randomly.
Pair Corralation between Ford and Marijuana
Taking into account the 90-day investment horizon Ford is expected to generate 848.18 times less return on investment than Marijuana. But when comparing it to its historical volatility, Ford Motor is 60.5 times less risky than Marijuana. It trades about 0.01 of its potential returns per unit of risk. Marijuana is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 0.02 in Marijuana on August 30, 2024 and sell it today you would lose (0.01) from holding Marijuana or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Marijuana
Performance |
| Timeline |
| Ford Motor |
| Marijuana |
Ford and Marijuana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Marijuana
The main advantage of trading using opposite Ford and Marijuana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Marijuana 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 Marijuana will offset losses from the drop in Marijuana's long position.The idea behind Ford Motor and Marijuana 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.| Marijuana vs. Priority Aviation | Marijuana vs. Cbd Life Sciences | Marijuana vs. Hemp Inc | Marijuana vs. Emergent Health Corp |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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