Correlation Between Ford and Old Second
Can any of the company-specific risk be diversified away by investing in both Ford and Old Second 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 Old Second into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Old Second Bancorp, you can compare the effects of market volatilities on Ford and Old Second 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 Old Second. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Old Second.
Diversification Opportunities for Ford and Old Second
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Old is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Old Second Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Second Bancorp 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 Old Second. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Second Bancorp has no effect on the direction of Ford i.e., Ford and Old Second go up and down completely randomly.
Pair Corralation between Ford and Old Second
Taking into account the 90-day investment horizon Ford is expected to generate 14.64 times less return on investment than Old Second. In addition to that, Ford is 1.3 times more volatile than Old Second Bancorp. It trades about 0.01 of its total potential returns per unit of risk. Old Second Bancorp is currently generating about 0.11 per unit of volatility. If you would invest 1,323 in Old Second Bancorp on August 25, 2024 and sell it today you would earn a total of 548.00 from holding Old Second Bancorp or generate 41.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Old Second Bancorp
Performance |
| Timeline |
| Ford Motor |
| Old Second Bancorp |
Ford and Old Second Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Old Second
The main advantage of trading using opposite Ford and Old Second positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Old Second 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 Old Second will offset losses from the drop in Old Second's long position.The idea behind Ford Motor and Old Second Bancorp 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.| Old Second vs. Ohio Valley Banc | Old Second vs. Peoples Bancorp | Old Second vs. OceanFirst Financial Corp | Old Second vs. QCR Holdings |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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