Correlation Between Ford and Otto Energy
Can any of the company-specific risk be diversified away by investing in both Ford and Otto Energy 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 Otto Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Otto Energy, you can compare the effects of market volatilities on Ford and Otto Energy 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 Otto Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Otto Energy.
Diversification Opportunities for Ford and Otto Energy
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Otto is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Otto Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otto Energy 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 Otto Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otto Energy has no effect on the direction of Ford i.e., Ford and Otto Energy go up and down completely randomly.
Pair Corralation between Ford and Otto Energy
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.27 times more return on investment than Otto Energy. However, Ford Motor is 3.74 times less risky than Otto Energy. It trades about 0.17 of its potential returns per unit of risk. Otto Energy is currently generating about -0.06 per unit of risk. If you would invest 1,033 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 77.00 from holding Ford Motor or generate 7.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ford Motor vs. Otto Energy
Performance |
| Timeline |
| Ford Motor |
| Otto Energy |
Ford and Otto Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Otto Energy
The main advantage of trading using opposite Ford and Otto Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Otto Energy 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 Otto Energy will offset losses from the drop in Otto Energy's long position.The idea behind Ford Motor and Otto Energy 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.| Otto Energy vs. EVE Health Group | Otto Energy vs. Dexus Convenience Retail | Otto Energy vs. Truscott Mining Corp | Otto Energy vs. Perseus Mining |
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 CEOs Directory module to screen CEOs from public companies around the world.
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