Correlation Between Ford and NANO
Can any of the company-specific risk be diversified away by investing in both Ford and NANO 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 NANO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and NANO, you can compare the effects of market volatilities on Ford and NANO 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 NANO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and NANO.
Diversification Opportunities for Ford and NANO
Modest diversification
The 3 months correlation between Ford and NANO is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and NANO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NANO 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 NANO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NANO has no effect on the direction of Ford i.e., Ford and NANO go up and down completely randomly.
Pair Corralation between Ford and NANO
Taking into account the 90-day investment horizon Ford is expected to generate 10.89 times less return on investment than NANO. But when comparing it to its historical volatility, Ford Motor is 2.73 times less risky than NANO. It trades about 0.01 of its potential returns per unit of risk. NANO is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 77.00 in NANO on August 25, 2024 and sell it today you would earn a total of 30.00 from holding NANO or generate 38.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 60.36% |
| Values | Daily Returns |
Ford Motor vs. NANO
Performance |
| Timeline |
| Ford Motor |
| NANO |
Ford and NANO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and NANO
The main advantage of trading using opposite Ford and NANO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, NANO 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 NANO will offset losses from the drop in NANO's long position.The idea behind Ford Motor and NANO 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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