Correlation Between Ford and One Gas
Can any of the company-specific risk be diversified away by investing in both Ford and One Gas 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 One Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and One Gas, you can compare the effects of market volatilities on Ford and One Gas 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 One Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and One Gas.
Diversification Opportunities for Ford and One Gas
Very weak diversification
The 3 months correlation between Ford and One is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and One Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Gas 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 One Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Gas has no effect on the direction of Ford i.e., Ford and One Gas go up and down completely randomly.
Pair Corralation between Ford and One Gas
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.6 times more return on investment than One Gas. However, Ford is 1.6 times more volatile than One Gas. It trades about 0.08 of its potential returns per unit of risk. One Gas is currently generating about 0.09 per unit of risk. If you would invest 1,042 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 68.00 from holding Ford Motor or generate 6.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.73% |
| Values | Daily Returns |
Ford Motor vs. One Gas
Performance |
| Timeline |
| Ford Motor |
| One Gas |
Ford and One Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and One Gas
The main advantage of trading using opposite Ford and One Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, One Gas 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 One Gas will offset losses from the drop in One Gas' long position.The idea behind Ford Motor and One Gas 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.| One Gas vs. Northwest Natural Gas | One Gas vs. Chesapeake Utilities | One Gas vs. NewJersey Resources | One Gas vs. RGC Resources |
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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