Correlation Between Ford and Prime Office
Can any of the company-specific risk be diversified away by investing in both Ford and Prime Office 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 Prime Office into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Prime Office AS, you can compare the effects of market volatilities on Ford and Prime Office 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 Prime Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Prime Office.
Diversification Opportunities for Ford and Prime Office
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Prime is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Prime Office AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Office AS 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 Prime Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Office AS has no effect on the direction of Ford i.e., Ford and Prime Office go up and down completely randomly.
Pair Corralation between Ford and Prime Office
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.05 times more return on investment than Prime Office. However, Ford is 1.05 times more volatile than Prime Office AS. It trades about 0.01 of its potential returns per unit of risk. Prime Office AS is currently generating about -0.03 per unit of risk. If you would invest 1,094 in Ford Motor on August 29, 2024 and sell it today you would earn a total of 16.00 from holding Ford Motor or generate 1.46% 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. Prime Office AS
Performance |
| Timeline |
| Ford Motor |
| Prime Office AS |
Ford and Prime Office Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Prime Office
The main advantage of trading using opposite Ford and Prime Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Prime Office 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 Prime Office will offset losses from the drop in Prime Office's long position.The idea behind Ford Motor and Prime Office AS 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.| Prime Office vs. BioPorto | Prime Office vs. Newcap Holding AS | Prime Office vs. Agat Ejendomme AS | Prime Office vs. PF Atlantic Petroleum |
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 Stocks Directory module to find actively traded stocks across global markets.
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