Correlation Between Ford and Performance Trust
Can any of the company-specific risk be diversified away by investing in both Ford and Performance Trust 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 Performance Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Performance Trust Municipal, you can compare the effects of market volatilities on Ford and Performance Trust 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 Performance Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Performance Trust.
Diversification Opportunities for Ford and Performance Trust
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Performance is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Performance Trust Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Trust 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 Performance Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Trust has no effect on the direction of Ford i.e., Ford and Performance Trust go up and down completely randomly.
Pair Corralation between Ford and Performance Trust
Taking into account the 90-day investment horizon Ford Motor is expected to generate 6.39 times more return on investment than Performance Trust. However, Ford is 6.39 times more volatile than Performance Trust Municipal. It trades about 0.13 of its potential returns per unit of risk. Performance Trust Municipal is currently generating about -0.04 per unit of risk. If you would invest 965.00 in Ford Motor on November 3, 2024 and sell it today you would earn a total of 43.00 from holding Ford Motor or generate 4.46% 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. Performance Trust Municipal
Performance |
| Timeline |
| Ford Motor |
| Performance Trust |
Ford and Performance Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Performance Trust
The main advantage of trading using opposite Ford and Performance Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Performance Trust 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 Performance Trust will offset losses from the drop in Performance Trust's long position.The idea behind Ford Motor and Performance Trust Municipal 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.| Performance Trust vs. Performance Trust Strategic | Performance Trust vs. Performance Trust Municipal | Performance Trust vs. Sierra Strategic Income | Performance Trust vs. Nuveen High Yield |
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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