Correlation Between Ford and Koninklijke Philips
Can any of the company-specific risk be diversified away by investing in both Ford and Koninklijke Philips 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 Koninklijke Philips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Koninklijke Philips NV, you can compare the effects of market volatilities on Ford and Koninklijke Philips 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 Koninklijke Philips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Koninklijke Philips.
Diversification Opportunities for Ford and Koninklijke Philips
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Koninklijke is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips 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 Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of Ford i.e., Ford and Koninklijke Philips go up and down completely randomly.
Pair Corralation between Ford and Koninklijke Philips
Taking into account the 90-day investment horizon Ford is expected to generate 2.55 times less return on investment than Koninklijke Philips. In addition to that, Ford is 1.05 times more volatile than Koninklijke Philips NV. It trades about 0.03 of its total potential returns per unit of risk. Koninklijke Philips NV is currently generating about 0.08 per unit of volatility. If you would invest 1,741 in Koninklijke Philips NV on September 2, 2024 and sell it today you would earn a total of 779.00 from holding Koninklijke Philips NV or generate 44.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Ford Motor vs. Koninklijke Philips NV
Performance |
| Timeline |
| Ford Motor |
| Koninklijke Philips |
Ford and Koninklijke Philips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Koninklijke Philips
The main advantage of trading using opposite Ford and Koninklijke Philips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Koninklijke Philips 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 Koninklijke Philips will offset losses from the drop in Koninklijke Philips' long position.The idea behind Ford Motor and Koninklijke Philips NV 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.| Koninklijke Philips vs. CENTURIA OFFICE REIT | Koninklijke Philips vs. Corporate Office Properties | Koninklijke Philips vs. Vishay Intertechnology | Koninklijke Philips vs. Computer And Technologies |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |