Correlation Between Ford and Plan Investment
Can any of the company-specific risk be diversified away by investing in both Ford and Plan Investment 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 Plan Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Plan Investment, you can compare the effects of market volatilities on Ford and Plan Investment 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 Plan Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Plan Investment.
Diversification Opportunities for Ford and Plan Investment
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Plan is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Plan Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plan Investment 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 Plan Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plan Investment has no effect on the direction of Ford i.e., Ford and Plan Investment go up and down completely randomly.
Pair Corralation between Ford and Plan Investment
If you would invest 1,122 in Ford Motor on August 28, 2024 and sell it today you would earn a total of 18.00 from holding Ford Motor or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Plan Investment
Performance |
| Timeline |
| Ford Motor |
| Plan Investment |
Ford and Plan Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Plan Investment
The main advantage of trading using opposite Ford and Plan Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Plan Investment 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 Plan Investment will offset losses from the drop in Plan Investment's long position.The idea behind Ford Motor and Plan Investment 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.| Plan Investment vs. The Hartford Small | Plan Investment vs. Tax Managed Mid Small | Plan Investment vs. Small Cap Value | Plan Investment vs. Small Pany Growth |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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