Correlation Between Ford and PLASTIC INDUSTRY
Can any of the company-specific risk be diversified away by investing in both Ford and PLASTIC INDUSTRY 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 PLASTIC INDUSTRY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and PLASTIC INDUSTRY LTD, you can compare the effects of market volatilities on Ford and PLASTIC INDUSTRY 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 PLASTIC INDUSTRY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and PLASTIC INDUSTRY.
Diversification Opportunities for Ford and PLASTIC INDUSTRY
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and PLASTIC is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and PLASTIC INDUSTRY LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLASTIC INDUSTRY LTD 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 PLASTIC INDUSTRY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLASTIC INDUSTRY LTD has no effect on the direction of Ford i.e., Ford and PLASTIC INDUSTRY go up and down completely randomly.
Pair Corralation between Ford and PLASTIC INDUSTRY
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the PLASTIC INDUSTRY. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 2.38 times less risky than PLASTIC INDUSTRY. The stock trades about 0.0 of its potential returns per unit of risk. The PLASTIC INDUSTRY LTD is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,100 in PLASTIC INDUSTRY LTD on August 31, 2024 and sell it today you would earn a total of 275.00 from holding PLASTIC INDUSTRY LTD or generate 6.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.16% |
| Values | Daily Returns |
Ford Motor vs. PLASTIC INDUSTRY LTD
Performance |
| Timeline |
| Ford Motor |
| PLASTIC INDUSTRY LTD |
Ford and PLASTIC INDUSTRY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and PLASTIC INDUSTRY
The main advantage of trading using opposite Ford and PLASTIC INDUSTRY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, PLASTIC INDUSTRY 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 PLASTIC INDUSTRY will offset losses from the drop in PLASTIC INDUSTRY's long position.The idea behind Ford Motor and PLASTIC INDUSTRY LTD 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.| PLASTIC INDUSTRY vs. FINCORP INVESTMENT LTD | PLASTIC INDUSTRY vs. MCB GROUP LTD | PLASTIC INDUSTRY vs. CAUDAN DEVELOPMENT LTD | PLASTIC INDUSTRY vs. LOTTOTECH LTD |
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 CEOs Directory module to screen CEOs from public companies around the world.
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