Correlation Between Ford and CIMB SP
Can any of the company-specific risk be diversified away by investing in both Ford and CIMB SP 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 CIMB SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and CIMB SP Ethical, you can compare the effects of market volatilities on Ford and CIMB SP 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 CIMB SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and CIMB SP.
Diversification Opportunities for Ford and CIMB SP
Weak diversification
The 3 months correlation between Ford and CIMB is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and CIMB SP Ethical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIMB SP Ethical 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 CIMB SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIMB SP Ethical has no effect on the direction of Ford i.e., Ford and CIMB SP go up and down completely randomly.
Pair Corralation between Ford and CIMB SP
Taking into account the 90-day investment horizon Ford is expected to generate 2.63 times less return on investment than CIMB SP. In addition to that, Ford is 2.45 times more volatile than CIMB SP Ethical. It trades about 0.02 of its total potential returns per unit of risk. CIMB SP Ethical is currently generating about 0.13 per unit of volatility. If you would invest 2,860 in CIMB SP Ethical on September 4, 2024 and sell it today you would earn a total of 969.00 from holding CIMB SP Ethical or generate 33.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Ford Motor vs. CIMB SP Ethical
Performance |
| Timeline |
| Ford Motor |
| CIMB SP Ethical |
Ford and CIMB SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and CIMB SP
The main advantage of trading using opposite Ford and CIMB SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, CIMB SP 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 CIMB SP will offset losses from the drop in CIMB SP's long position.The idea behind Ford Motor and CIMB SP Ethical 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.| CIMB SP vs. iShares Govt Bond | CIMB SP vs. Amundi MSCI Europe | CIMB SP vs. iShares Global AAA AA | CIMB SP vs. iShares Smart City |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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