Correlation Between Ford and Nationwide Building
Can any of the company-specific risk be diversified away by investing in both Ford and Nationwide Building 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 Nationwide Building into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Nationwide Building Society, you can compare the effects of market volatilities on Ford and Nationwide Building 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 Nationwide Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Nationwide Building.
Diversification Opportunities for Ford and Nationwide Building
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Nationwide is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nationwide Building Society in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Building 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 Nationwide Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Building has no effect on the direction of Ford i.e., Ford and Nationwide Building go up and down completely randomly.
Pair Corralation between Ford and Nationwide Building
Taking into account the 90-day investment horizon Ford Motor is expected to generate 6.17 times more return on investment than Nationwide Building. However, Ford is 6.17 times more volatile than Nationwide Building Society. It trades about 0.03 of its potential returns per unit of risk. Nationwide Building Society is currently generating about 0.09 per unit of risk. If you would invest 1,011 in Ford Motor on September 2, 2024 and sell it today you would earn a total of 102.00 from holding Ford Motor or generate 10.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Ford Motor vs. Nationwide Building Society
Performance |
| Timeline |
| Ford Motor |
| Nationwide Building |
Ford and Nationwide Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Nationwide Building
The main advantage of trading using opposite Ford and Nationwide Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Nationwide Building 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 Nationwide Building will offset losses from the drop in Nationwide Building's long position.The idea behind Ford Motor and Nationwide Building Society 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.| Nationwide Building vs. Jacquet Metal Service | Nationwide Building vs. Power Metal Resources | Nationwide Building vs. Datalogic | Nationwide Building vs. Central Asia Metals |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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