Correlation Between Ford and Paramount Global
Can any of the company-specific risk be diversified away by investing in both Ford and Paramount Global 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 Paramount Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Paramount Global Class, you can compare the effects of market volatilities on Ford and Paramount Global 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 Paramount Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Paramount Global.
Diversification Opportunities for Ford and Paramount Global
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Paramount is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Paramount Global Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Global Class 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 Paramount Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Global Class has no effect on the direction of Ford i.e., Ford and Paramount Global go up and down completely randomly.
Pair Corralation between Ford and Paramount Global
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Paramount Global. In addition to that, Ford is 1.79 times more volatile than Paramount Global Class. It trades about 0.0 of its total potential returns per unit of risk. Paramount Global Class is currently generating about 0.22 per unit of volatility. If you would invest 2,178 in Paramount Global Class on August 24, 2024 and sell it today you would earn a total of 157.00 from holding Paramount Global Class or generate 7.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Paramount Global Class
Performance |
| Timeline |
| Ford Motor |
| Paramount Global Class |
Ford and Paramount Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Paramount Global
The main advantage of trading using opposite Ford and Paramount Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Paramount Global 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 Paramount Global will offset losses from the drop in Paramount Global's long position.The idea behind Ford Motor and Paramount Global Class 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.| Paramount Global vs. Fox Corp Class | Paramount Global vs. News Corp A | Paramount Global vs. News Corp B | Paramount Global vs. Liberty Media |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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