Correlation Between Ford and Royal Plus
Can any of the company-specific risk be diversified away by investing in both Ford and Royal Plus 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 Royal Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Royal Plus PCL, you can compare the effects of market volatilities on Ford and Royal Plus 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 Royal Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Royal Plus.
Diversification Opportunities for Ford and Royal Plus
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Royal is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Royal Plus PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Plus PCL 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 Royal Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Plus PCL has no effect on the direction of Ford i.e., Ford and Royal Plus go up and down completely randomly.
Pair Corralation between Ford and Royal Plus
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.75 times more return on investment than Royal Plus. However, Ford Motor is 1.33 times less risky than Royal Plus. It trades about 0.02 of its potential returns per unit of risk. Royal Plus PCL is currently generating about -0.01 per unit of risk. If you would invest 957.00 in Ford Motor on September 12, 2024 and sell it today you would earn a total of 99.00 from holding Ford Motor or generate 10.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.17% |
| Values | Daily Returns |
Ford Motor vs. Royal Plus PCL
Performance |
| Timeline |
| Ford Motor |
| Royal Plus PCL |
Ford and Royal Plus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Royal Plus
The main advantage of trading using opposite Ford and Royal Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Royal Plus 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 Royal Plus will offset losses from the drop in Royal Plus' long position.The idea behind Ford Motor and Royal Plus PCL 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.| Royal Plus vs. Delta Electronics Public | Royal Plus vs. Delta Electronics Public | Royal Plus vs. Airports of Thailand | Royal Plus vs. Airports of Thailand |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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