Correlation Between Ford and MKS Instruments
Can any of the company-specific risk be diversified away by investing in both Ford and MKS Instruments 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 MKS Instruments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and MKS Instruments, you can compare the effects of market volatilities on Ford and MKS Instruments 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 MKS Instruments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and MKS Instruments.
Diversification Opportunities for Ford and MKS Instruments
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and MKS is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and MKS Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MKS Instruments 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 MKS Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MKS Instruments has no effect on the direction of Ford i.e., Ford and MKS Instruments go up and down completely randomly.
Pair Corralation between Ford and MKS Instruments
Taking into account the 90-day investment horizon Ford is expected to generate 1.97 times less return on investment than MKS Instruments. But when comparing it to its historical volatility, Ford Motor is 1.47 times less risky than MKS Instruments. It trades about 0.03 of its potential returns per unit of risk. MKS Instruments is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 10,723 in MKS Instruments on August 31, 2024 and sell it today you would earn a total of 513.00 from holding MKS Instruments or generate 4.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. MKS Instruments
Performance |
| Timeline |
| Ford Motor |
| MKS Instruments |
Ford and MKS Instruments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and MKS Instruments
The main advantage of trading using opposite Ford and MKS Instruments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, MKS Instruments 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 MKS Instruments will offset losses from the drop in MKS Instruments' long position.The idea behind Ford Motor and MKS Instruments 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.| MKS Instruments vs. Vontier Corp | MKS Instruments vs. Teledyne Technologies Incorporated | MKS Instruments vs. ESCO Technologies | MKS Instruments vs. Sensata Technologies Holding |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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