Correlation Between Ford and Payden Core
Can any of the company-specific risk be diversified away by investing in both Ford and Payden Core 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 Payden Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Payden Core Bond, you can compare the effects of market volatilities on Ford and Payden Core 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 Payden Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Payden Core.
Diversification Opportunities for Ford and Payden Core
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Payden is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Payden Core Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Core Bond 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 Payden Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Core Bond has no effect on the direction of Ford i.e., Ford and Payden Core go up and down completely randomly.
Pair Corralation between Ford and Payden Core
Taking into account the 90-day investment horizon Ford Motor is expected to generate 6.94 times more return on investment than Payden Core. However, Ford is 6.94 times more volatile than Payden Core Bond. It trades about 0.01 of its potential returns per unit of risk. Payden Core Bond is currently generating about 0.05 per unit of risk. If you would invest 1,131 in Ford Motor on August 29, 2024 and sell it today you would lose (21.00) from holding Ford Motor or give up 1.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.52% |
| Values | Daily Returns |
Ford Motor vs. Payden Core Bond
Performance |
| Timeline |
| Ford Motor |
| Payden Core Bond |
Ford and Payden Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Payden Core
The main advantage of trading using opposite Ford and Payden Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Payden Core 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 Payden Core will offset losses from the drop in Payden Core's long position.The idea behind Ford Motor and Payden Core Bond 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.| Payden Core vs. Blrc Sgy Mnp | Payden Core vs. Vanguard Emerging Markets | Payden Core vs. Federated Short Intermediate Duration | Payden Core vs. Multisector Bond Sma |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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