Correlation Between Ford and OShares Europe
Can any of the company-specific risk be diversified away by investing in both Ford and OShares Europe 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 OShares Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and OShares Europe Quality, you can compare the effects of market volatilities on Ford and OShares Europe 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 OShares Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and OShares Europe.
Diversification Opportunities for Ford and OShares Europe
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and OShares is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and OShares Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OShares Europe Quality 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 OShares Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OShares Europe Quality has no effect on the direction of Ford i.e., Ford and OShares Europe go up and down completely randomly.
Pair Corralation between Ford and OShares Europe
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.93 times more return on investment than OShares Europe. However, Ford is 2.93 times more volatile than OShares Europe Quality. It trades about 0.03 of its potential returns per unit of risk. OShares Europe Quality is currently generating about -0.29 per unit of risk. If you would invest 1,109 in Ford Motor on August 25, 2024 and sell it today you would earn a total of 9.00 from holding Ford Motor or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. OShares Europe Quality
Performance |
| Timeline |
| Ford Motor |
| OShares Europe Quality |
Ford and OShares Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and OShares Europe
The main advantage of trading using opposite Ford and OShares Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, OShares Europe 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 OShares Europe will offset losses from the drop in OShares Europe's long position.The idea behind Ford Motor and OShares Europe Quality 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.| OShares Europe vs. WisdomTree Europe Hedged | OShares Europe vs. WisdomTree International Hedged | OShares Europe vs. WisdomTree Emerging Markets | OShares Europe vs. WisdomTree Dynamic Currency |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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