Correlation Between Ford and Polymeric Resources
Can any of the company-specific risk be diversified away by investing in both Ford and Polymeric Resources 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 Polymeric Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Polymeric Resources, you can compare the effects of market volatilities on Ford and Polymeric Resources 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 Polymeric Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Polymeric Resources.
Diversification Opportunities for Ford and Polymeric Resources
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and Polymeric is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Polymeric Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polymeric Resources 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 Polymeric Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polymeric Resources has no effect on the direction of Ford i.e., Ford and Polymeric Resources go up and down completely randomly.
Pair Corralation between Ford and Polymeric Resources
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.63 times more return on investment than Polymeric Resources. However, Ford Motor is 1.58 times less risky than Polymeric Resources. It trades about -0.01 of its potential returns per unit of risk. Polymeric Resources is currently generating about -0.09 per unit of risk. If you would invest 1,184 in Ford Motor on September 1, 2024 and sell it today you would lose (71.00) from holding Ford Motor or give up 6.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Ford Motor vs. Polymeric Resources
Performance |
| Timeline |
| Ford Motor |
| Polymeric Resources |
Ford and Polymeric Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Polymeric Resources
The main advantage of trading using opposite Ford and Polymeric Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Polymeric Resources 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 Polymeric Resources will offset losses from the drop in Polymeric Resources' long position.The idea behind Ford Motor and Polymeric Resources 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.| Polymeric Resources vs. BASF SE NA | Polymeric Resources vs. Braskem SA Class | Polymeric Resources vs. Lsb Industries | Polymeric Resources vs. Dow Inc |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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