Correlation Between Ford and Marstons PLC
Can any of the company-specific risk be diversified away by investing in both Ford and Marstons PLC 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 Marstons PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Marstons PLC, you can compare the effects of market volatilities on Ford and Marstons PLC 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 Marstons PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Marstons PLC.
Diversification Opportunities for Ford and Marstons PLC
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ford and Marstons is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Marstons PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marstons PLC 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 Marstons PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marstons PLC has no effect on the direction of Ford i.e., Ford and Marstons PLC go up and down completely randomly.
Pair Corralation between Ford and Marstons PLC
Taking into account the 90-day investment horizon Ford is expected to generate 3.13 times less return on investment than Marstons PLC. But when comparing it to its historical volatility, Ford Motor is 1.85 times less risky than Marstons PLC. It trades about 0.01 of its potential returns per unit of risk. Marstons PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 399.00 in Marstons PLC on August 28, 2024 and sell it today you would earn a total of 29.00 from holding Marstons PLC or generate 7.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Marstons PLC
Performance |
| Timeline |
| Ford Motor |
| Marstons PLC |
Ford and Marstons PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Marstons PLC
The main advantage of trading using opposite Ford and Marstons PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Marstons PLC 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 Marstons PLC will offset losses from the drop in Marstons PLC's long position.The idea behind Ford Motor and Marstons PLC 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.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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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