Correlation Between Ford and PhaseBio Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Ford and PhaseBio Pharmaceuticals 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 PhaseBio Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and PhaseBio Pharmaceuticals, you can compare the effects of market volatilities on Ford and PhaseBio Pharmaceuticals 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 PhaseBio Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and PhaseBio Pharmaceuticals.
Diversification Opportunities for Ford and PhaseBio Pharmaceuticals
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and PhaseBio is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and PhaseBio Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PhaseBio Pharmaceuticals 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 PhaseBio Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PhaseBio Pharmaceuticals has no effect on the direction of Ford i.e., Ford and PhaseBio Pharmaceuticals go up and down completely randomly.
Pair Corralation between Ford and PhaseBio Pharmaceuticals
Taking into account the 90-day investment horizon Ford is expected to generate 1242.31 times less return on investment than PhaseBio Pharmaceuticals. But when comparing it to its historical volatility, Ford Motor is 67.93 times less risky than PhaseBio Pharmaceuticals. It trades about 0.01 of its potential returns per unit of risk. PhaseBio Pharmaceuticals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3.00 in PhaseBio Pharmaceuticals on September 3, 2024 and sell it today you would lose (2.97) from holding PhaseBio Pharmaceuticals or give up 99.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 30.71% |
| Values | Daily Returns |
Ford Motor vs. PhaseBio Pharmaceuticals
Performance |
| Timeline |
| Ford Motor |
| PhaseBio Pharmaceuticals |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and PhaseBio Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and PhaseBio Pharmaceuticals
The main advantage of trading using opposite Ford and PhaseBio Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, PhaseBio Pharmaceuticals 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 PhaseBio Pharmaceuticals will offset losses from the drop in PhaseBio Pharmaceuticals' long position.The idea behind Ford Motor and PhaseBio Pharmaceuticals 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.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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