Correlation Between Ford and Cambria Micro
Can any of the company-specific risk be diversified away by investing in both Ford and Cambria Micro 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 Cambria Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Cambria Micro And, you can compare the effects of market volatilities on Ford and Cambria Micro 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 Cambria Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Cambria Micro.
Diversification Opportunities for Ford and Cambria Micro
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Cambria is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cambria Micro And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Micro And 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 Cambria Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Micro And has no effect on the direction of Ford i.e., Ford and Cambria Micro go up and down completely randomly.
Pair Corralation between Ford and Cambria Micro
Taking into account the 90-day investment horizon Ford is expected to generate 1.29 times less return on investment than Cambria Micro. In addition to that, Ford is 1.74 times more volatile than Cambria Micro And. It trades about 0.02 of its total potential returns per unit of risk. Cambria Micro And is currently generating about 0.05 per unit of volatility. If you would invest 2,632 in Cambria Micro And on October 26, 2024 and sell it today you would earn a total of 23.00 from holding Cambria Micro And or generate 0.87% 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. Cambria Micro And
Performance |
| Timeline |
| Ford Motor |
| Cambria Micro And |
Ford and Cambria Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Cambria Micro
The main advantage of trading using opposite Ford and Cambria Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Cambria Micro 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 Cambria Micro will offset losses from the drop in Cambria Micro's long position.The idea behind Ford Motor and Cambria Micro And 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.| Cambria Micro vs. Research Affiliates Deletions | Cambria Micro vs. First Trust Dow | Cambria Micro vs. iShares Micro Cap ETF | Cambria Micro vs. Vanguard Mega Cap |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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