Correlation Between Ford and Pampa Energia
Can any of the company-specific risk be diversified away by investing in both Ford and Pampa Energia 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 Pampa Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Pampa Energia SA, you can compare the effects of market volatilities on Ford and Pampa Energia 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 Pampa Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Pampa Energia.
Diversification Opportunities for Ford and Pampa Energia
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and Pampa is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Pampa Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energia SA 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 Pampa Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energia SA has no effect on the direction of Ford i.e., Ford and Pampa Energia go up and down completely randomly.
Pair Corralation between Ford and Pampa Energia
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Pampa Energia. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.22 times less risky than Pampa Energia. The stock trades about -0.02 of its potential returns per unit of risk. The Pampa Energia SA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 287,000 in Pampa Energia SA on November 2, 2024 and sell it today you would earn a total of 141,000 from holding Pampa Energia SA or generate 49.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.04% |
| Values | Daily Returns |
Ford Motor vs. Pampa Energia SA
Performance |
| Timeline |
| Ford Motor |
| Pampa Energia SA |
Ford and Pampa Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Pampa Energia
The main advantage of trading using opposite Ford and Pampa Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Pampa Energia 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 Pampa Energia will offset losses from the drop in Pampa Energia's long position.The idea behind Ford Motor and Pampa Energia SA 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.| Pampa Energia vs. Transportadora de Gas | Pampa Energia vs. Compania de Transporte | Pampa Energia vs. United States Steel | Pampa Energia vs. Harmony Gold Mining |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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