Correlation Between Ford and Transamerica Mid
Can any of the company-specific risk be diversified away by investing in both Ford and Transamerica Mid 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 Transamerica Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Transamerica Mid Cap, you can compare the effects of market volatilities on Ford and Transamerica Mid 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 Transamerica Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Transamerica Mid.
Diversification Opportunities for Ford and Transamerica Mid
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Transamerica is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Transamerica Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Mid Cap 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 Transamerica Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Mid Cap has no effect on the direction of Ford i.e., Ford and Transamerica Mid go up and down completely randomly.
Pair Corralation between Ford and Transamerica Mid
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.69 times more return on investment than Transamerica Mid. However, Ford is 2.69 times more volatile than Transamerica Mid Cap. It trades about 0.19 of its potential returns per unit of risk. Transamerica Mid Cap is currently generating about 0.34 per unit of risk. If you would invest 1,027 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 83.00 from holding Ford Motor or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Transamerica Mid Cap
Performance |
| Timeline |
| Ford Motor |
| Transamerica Mid Cap |
Ford and Transamerica Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Transamerica Mid
The main advantage of trading using opposite Ford and Transamerica Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Transamerica Mid 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 Transamerica Mid will offset losses from the drop in Transamerica Mid's long position.The idea behind Ford Motor and Transamerica Mid Cap 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.| Transamerica Mid vs. T Rowe Price | Transamerica Mid vs. Ms Global Fixed | Transamerica Mid vs. Us Global Investors | Transamerica Mid vs. Scharf Global Opportunity |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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