Correlation Between Ford and Nikon Corp
Can any of the company-specific risk be diversified away by investing in both Ford and Nikon Corp 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 Nikon Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Nikon Corp, you can compare the effects of market volatilities on Ford and Nikon Corp 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 Nikon Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Nikon Corp.
Diversification Opportunities for Ford and Nikon Corp
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Nikon is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nikon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nikon Corp 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 Nikon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nikon Corp has no effect on the direction of Ford i.e., Ford and Nikon Corp go up and down completely randomly.
Pair Corralation between Ford and Nikon Corp
Taking into account the 90-day investment horizon Ford is expected to generate 2.48 times less return on investment than Nikon Corp. But when comparing it to its historical volatility, Ford Motor is 1.02 times less risky than Nikon Corp. It trades about 0.01 of its potential returns per unit of risk. Nikon Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 905.00 in Nikon Corp on August 28, 2024 and sell it today you would earn a total of 276.00 from holding Nikon Corp or generate 30.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Nikon Corp
Performance |
| Timeline |
| Ford Motor |
| Nikon Corp |
Ford and Nikon Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Nikon Corp
The main advantage of trading using opposite Ford and Nikon Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Nikon Corp 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 Nikon Corp will offset losses from the drop in Nikon Corp's long position.The idea behind Ford Motor and Nikon Corp 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.| Nikon Corp vs. Yamaha Corp DRC | Nikon Corp vs. Planet Fitness | Nikon Corp vs. Plby Group | Nikon Corp vs. Shimano Inc ADR |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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