Correlation Between Ford and Payden Low
Can any of the company-specific risk be diversified away by investing in both Ford and Payden Low 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 Low 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 Low Duration, you can compare the effects of market volatilities on Ford and Payden Low 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 Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Payden Low.
Diversification Opportunities for Ford and Payden Low
-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 Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Low Duration 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 Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Low Duration has no effect on the direction of Ford i.e., Ford and Payden Low go up and down completely randomly.
Pair Corralation between Ford and Payden Low
Taking into account the 90-day investment horizon Ford Motor is expected to generate 19.49 times more return on investment than Payden Low. However, Ford is 19.49 times more volatile than Payden Low Duration. It trades about 0.23 of its potential returns per unit of risk. Payden Low Duration is currently generating about 0.05 per unit of risk. If you would invest 1,015 in Ford Motor on September 1, 2024 and sell it today you would earn a total of 98.00 from holding Ford Motor or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Payden Low Duration
Performance |
| Timeline |
| Ford Motor |
| Payden Low Duration |
Ford and Payden Low Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Payden Low
The main advantage of trading using opposite Ford and Payden Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Payden Low 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 Low will offset losses from the drop in Payden Low's long position.The idea behind Ford Motor and Payden Low Duration 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 Low vs. Vanguard Developed Markets | Payden Low vs. Aqr Long Short Equity | Payden Low vs. Sp Midcap Index | Payden Low vs. Artisan Emerging Markets |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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