Correlation Between Ford and Atea ASA
Can any of the company-specific risk be diversified away by investing in both Ford and Atea ASA 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 Atea ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Atea ASA, you can compare the effects of market volatilities on Ford and Atea ASA 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 Atea ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Atea ASA.
Diversification Opportunities for Ford and Atea ASA
Excellent diversification
The 3 months correlation between Ford and Atea is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Atea ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atea ASA 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 Atea ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atea ASA has no effect on the direction of Ford i.e., Ford and Atea ASA go up and down completely randomly.
Pair Corralation between Ford and Atea ASA
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.52 times more return on investment than Atea ASA. However, Ford is 1.52 times more volatile than Atea ASA. It trades about 0.16 of its potential returns per unit of risk. Atea ASA is currently generating about -0.04 per unit of risk. If you would invest 965.00 in Ford Motor on November 2, 2024 and sell it today you would earn a total of 51.00 from holding Ford Motor or generate 5.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Ford Motor vs. Atea ASA
Performance |
| Timeline |
| Ford Motor |
| Atea ASA |
Ford and Atea ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Atea ASA
The main advantage of trading using opposite Ford and Atea ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Atea ASA 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 Atea ASA will offset losses from the drop in Atea ASA's long position.The idea behind Ford Motor and Atea ASA 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.| Atea ASA vs. Caseys General Stores | Atea ASA vs. National Retail Properties | Atea ASA vs. Burlington Stores | Atea ASA vs. PICKN PAY STORES |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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