Correlation Between Ford and Raiffeisen Bank
Can any of the company-specific risk be diversified away by investing in both Ford and Raiffeisen Bank 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 Raiffeisen Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Raiffeisen Bank International, you can compare the effects of market volatilities on Ford and Raiffeisen Bank 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 Raiffeisen Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Raiffeisen Bank.
Diversification Opportunities for Ford and Raiffeisen Bank
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Raiffeisen is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Raiffeisen Bank International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raiffeisen Bank Inte 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 Raiffeisen Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raiffeisen Bank Inte has no effect on the direction of Ford i.e., Ford and Raiffeisen Bank go up and down completely randomly.
Pair Corralation between Ford and Raiffeisen Bank
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.99 times more return on investment than Raiffeisen Bank. However, Ford Motor is 1.01 times less risky than Raiffeisen Bank. It trades about 0.01 of its potential returns per unit of risk. Raiffeisen Bank International is currently generating about -0.03 per unit of risk. If you would invest 1,122 in Ford Motor on August 27, 2024 and sell it today you would lose (4.00) from holding Ford Motor or give up 0.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Raiffeisen Bank International
Performance |
| Timeline |
| Ford Motor |
| Raiffeisen Bank Inte |
Ford and Raiffeisen Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Raiffeisen Bank
The main advantage of trading using opposite Ford and Raiffeisen Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Raiffeisen Bank 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 Raiffeisen Bank will offset losses from the drop in Raiffeisen Bank's long position.The idea behind Ford Motor and Raiffeisen Bank International 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.| Raiffeisen Bank vs. Vienna Insurance Group | Raiffeisen Bank vs. SBM Offshore NV | Raiffeisen Bank vs. AMAG Austria Metall | Raiffeisen Bank vs. CNH Industrial NV |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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