Correlation Between Ford and ONEOK
Can any of the company-specific risk be diversified away by investing in both Ford and ONEOK 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 ONEOK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and ONEOK Inc, you can compare the effects of market volatilities on Ford and ONEOK 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 ONEOK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and ONEOK.
Diversification Opportunities for Ford and ONEOK
Very weak diversification
The 3 months correlation between Ford and ONEOK is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc 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 ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of Ford i.e., Ford and ONEOK go up and down completely randomly.
Pair Corralation between Ford and ONEOK
Taking into account the 90-day investment horizon Ford is expected to generate 2.93 times less return on investment than ONEOK. In addition to that, Ford is 1.71 times more volatile than ONEOK Inc. It trades about 0.04 of its total potential returns per unit of risk. ONEOK Inc is currently generating about 0.19 per unit of volatility. If you would invest 5,824 in ONEOK Inc on August 26, 2024 and sell it today you would earn a total of 5,176 from holding ONEOK Inc or generate 88.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.81% |
| Values | Daily Returns |
Ford Motor vs. ONEOK Inc
Performance |
| Timeline |
| Ford Motor |
| ONEOK Inc |
Ford and ONEOK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and ONEOK
The main advantage of trading using opposite Ford and ONEOK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, ONEOK 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 ONEOK will offset losses from the drop in ONEOK's long position.The idea behind Ford Motor and ONEOK Inc 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.| ONEOK vs. Fair Isaac Corp | ONEOK vs. PARKEN Sport Entertainment | ONEOK vs. Air New Zealand | ONEOK vs. ANTA SPORTS PRODUCT |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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