Correlation Between Ford and Mendocino Brewing
Can any of the company-specific risk be diversified away by investing in both Ford and Mendocino Brewing 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 Mendocino Brewing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Mendocino Brewing, you can compare the effects of market volatilities on Ford and Mendocino Brewing 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 Mendocino Brewing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Mendocino Brewing.
Diversification Opportunities for Ford and Mendocino Brewing
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Mendocino is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mendocino Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mendocino Brewing 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 Mendocino Brewing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mendocino Brewing has no effect on the direction of Ford i.e., Ford and Mendocino Brewing go up and down completely randomly.
Pair Corralation between Ford and Mendocino Brewing
If you would invest 1,111 in Ford Motor on August 27, 2024 and sell it today you would earn a total of 7.00 from holding Ford Motor or generate 0.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 0.66% |
| Values | Daily Returns |
Ford Motor vs. Mendocino Brewing
Performance |
| Timeline |
| Ford Motor |
| Mendocino Brewing |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Mendocino Brewing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Mendocino Brewing
The main advantage of trading using opposite Ford and Mendocino Brewing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Mendocino Brewing 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 Mendocino Brewing will offset losses from the drop in Mendocino Brewing's long position.The idea behind Ford Motor and Mendocino Brewing 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.| Mendocino Brewing vs. Molson Coors Brewing | Mendocino Brewing vs. Budweiser Brewing | Mendocino Brewing vs. Boston Beer | Mendocino Brewing vs. Anheuser Busch InBev SANV |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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