Correlation Between Ford and Nel ASA
Can any of the company-specific risk be diversified away by investing in both Ford and Nel ASA 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 Nel ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Nel ASA, you can compare the effects of market volatilities on Ford and Nel ASA 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 Nel ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Nel ASA.
Diversification Opportunities for Ford and Nel ASA
Very weak diversification
The 3 months correlation between Ford and Nel is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nel ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nel ASA 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 Nel ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nel ASA has no effect on the direction of Ford i.e., Ford and Nel ASA go up and down completely randomly.
Pair Corralation between Ford and Nel ASA
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.23 times more return on investment than Nel ASA. However, Ford Motor is 4.3 times less risky than Nel ASA. It trades about 0.07 of its potential returns per unit of risk. Nel ASA is currently generating about -0.08 per unit of risk. If you would invest 988.00 in Ford Motor on November 4, 2024 and sell it today you would earn a total of 20.00 from holding Ford Motor or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Ford Motor vs. Nel ASA
Performance |
| Timeline |
| Ford Motor |
| Nel ASA |
Ford and Nel ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Nel ASA
The main advantage of trading using opposite Ford and Nel ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Nel ASA 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 Nel ASA will offset losses from the drop in Nel ASA's long position.The idea behind Ford Motor and Nel ASA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |