Correlation Between Ford and Real Return
Can any of the company-specific risk be diversified away by investing in both Ford and Real Return 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 Real Return into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Real Return Fund, you can compare the effects of market volatilities on Ford and Real Return 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 Real Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Real Return.
Diversification Opportunities for Ford and Real Return
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Real is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Real Return Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Return Fund 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 Real Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Return Fund has no effect on the direction of Ford i.e., Ford and Real Return go up and down completely randomly.
Pair Corralation between Ford and Real Return
Taking into account the 90-day investment horizon Ford Motor is expected to generate 4.63 times more return on investment than Real Return. However, Ford is 4.63 times more volatile than Real Return Fund. It trades about 0.14 of its potential returns per unit of risk. Real Return Fund is currently generating about 0.14 per unit of risk. If you would invest 988.00 in Ford Motor on October 21, 2024 and sell it today you would earn a total of 30.00 from holding Ford Motor or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Real Return Fund
Performance |
| Timeline |
| Ford Motor |
| Real Return Fund |
Ford and Real Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Real Return
The main advantage of trading using opposite Ford and Real Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Real Return 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 Real Return will offset losses from the drop in Real Return's long position.The idea behind Ford Motor and Real Return Fund 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.| Real Return vs. Gnma Fund Institutional | Real Return vs. Investment Grade Porate | Real Return vs. Long Term Government Fund | Real Return vs. Pimco Em Fundamental |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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