Correlation Between Ford and Barclays Capital
Can any of the company-specific risk be diversified away by investing in both Ford and Barclays Capital 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 Barclays Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Barclays Capital, you can compare the effects of market volatilities on Ford and Barclays Capital 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 Barclays Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Barclays Capital.
Diversification Opportunities for Ford and Barclays Capital
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Barclays is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Barclays Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays Capital 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 Barclays Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays Capital has no effect on the direction of Ford i.e., Ford and Barclays Capital go up and down completely randomly.
Pair Corralation between Ford and Barclays Capital
Taking into account the 90-day investment horizon Ford is expected to generate 7.9 times less return on investment than Barclays Capital. In addition to that, Ford is 1.85 times more volatile than Barclays Capital. It trades about 0.01 of its total potential returns per unit of risk. Barclays Capital is currently generating about 0.17 per unit of volatility. If you would invest 2,658 in Barclays Capital on August 27, 2024 and sell it today you would earn a total of 971.00 from holding Barclays Capital or generate 36.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 31.65% |
| Values | Daily Returns |
Ford Motor vs. Barclays Capital
Performance |
| Timeline |
| Ford Motor |
| Barclays Capital |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Barclays Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Barclays Capital
The main advantage of trading using opposite Ford and Barclays Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Barclays Capital 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 Barclays Capital will offset losses from the drop in Barclays Capital's long position.The idea behind Ford Motor and Barclays Capital 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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