Correlation Between Ford and Imerys SA
Can any of the company-specific risk be diversified away by investing in both Ford and Imerys SA 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 Imerys SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Imerys SA, you can compare the effects of market volatilities on Ford and Imerys SA 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 Imerys SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Imerys SA.
Diversification Opportunities for Ford and Imerys SA
Weak diversification
The 3 months correlation between Ford and Imerys is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Imerys SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imerys SA 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 Imerys SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imerys SA has no effect on the direction of Ford i.e., Ford and Imerys SA go up and down completely randomly.
Pair Corralation between Ford and Imerys SA
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Imerys SA. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.14 times less risky than Imerys SA. The stock trades about -0.07 of its potential returns per unit of risk. The Imerys SA is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 2,954 in Imerys SA on October 26, 2024 and sell it today you would lose (202.00) from holding Imerys SA or give up 6.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.72% |
| Values | Daily Returns |
Ford Motor vs. Imerys SA
Performance |
| Timeline |
| Ford Motor |
| Imerys SA |
Ford and Imerys SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Imerys SA
The main advantage of trading using opposite Ford and Imerys SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Imerys SA 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 Imerys SA will offset losses from the drop in Imerys SA's long position.The idea behind Ford Motor and Imerys SA 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.| Imerys SA vs. Rubis SCA | Imerys SA vs. Eramet SA | Imerys SA vs. Nexity | Imerys SA vs. Compagnie de Saint Gobain |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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