Correlation Between Ford and Meridian Equity
Can any of the company-specific risk be diversified away by investing in both Ford and Meridian Equity 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 Meridian Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Meridian Equity Income, you can compare the effects of market volatilities on Ford and Meridian Equity 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 Meridian Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Meridian Equity.
Diversification Opportunities for Ford and Meridian Equity
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Meridian is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Meridian Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Equity Income 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 Meridian Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Equity Income has no effect on the direction of Ford i.e., Ford and Meridian Equity go up and down completely randomly.
Pair Corralation between Ford and Meridian Equity
Taking into account the 90-day investment horizon Ford Motor is expected to generate 6.03 times more return on investment than Meridian Equity. However, Ford is 6.03 times more volatile than Meridian Equity Income. It trades about 0.05 of its potential returns per unit of risk. Meridian Equity Income is currently generating about 0.15 per unit of risk. If you would invest 1,092 in Ford Motor on August 26, 2024 and sell it today you would earn a total of 26.00 from holding Ford Motor or generate 2.38% 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. Meridian Equity Income
Performance |
| Timeline |
| Ford Motor |
| Meridian Equity Income |
Ford and Meridian Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Meridian Equity
The main advantage of trading using opposite Ford and Meridian Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Meridian Equity 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 Meridian Equity will offset losses from the drop in Meridian Equity's long position.The idea behind Ford Motor and Meridian Equity Income 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.| Meridian Equity vs. Ab Small Cap | Meridian Equity vs. Massmutual Select Small | Meridian Equity vs. Ab Small Cap | Meridian Equity vs. Vanguard Small Cap Index |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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