Correlation Between Ford and Polen International
Can any of the company-specific risk be diversified away by investing in both Ford and Polen International 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 Polen International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Polen International Growth, you can compare the effects of market volatilities on Ford and Polen International 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 Polen International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Polen International.
Diversification Opportunities for Ford and Polen International
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Polen is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Polen International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polen International 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 Polen International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polen International has no effect on the direction of Ford i.e., Ford and Polen International go up and down completely randomly.
Pair Corralation between Ford and Polen International
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.65 times more return on investment than Polen International. However, Ford is 2.65 times more volatile than Polen International Growth. It trades about 0.04 of its potential returns per unit of risk. Polen International Growth is currently generating about 0.02 per unit of risk. If you would invest 959.00 in Ford Motor on August 26, 2024 and sell it today you would earn a total of 159.00 from holding Ford Motor or generate 16.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Polen International Growth
Performance |
| Timeline |
| Ford Motor |
| Polen International |
Ford and Polen International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Polen International
The main advantage of trading using opposite Ford and Polen International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Polen International 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 Polen International will offset losses from the drop in Polen International's long position.The idea behind Ford Motor and Polen International Growth 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.| Polen International vs. Polen Growth Fund | Polen International vs. Polen Growth Fund | Polen International vs. Polen Global Growth | Polen International vs. Polen Small |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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