Correlation Between Ford and Equity Growth
Can any of the company-specific risk be diversified away by investing in both Ford and Equity Growth 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 Equity Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Equity Growth Strategy, you can compare the effects of market volatilities on Ford and Equity Growth 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 Equity Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Equity Growth.
Diversification Opportunities for Ford and Equity Growth
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Equity is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Equity Growth Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth Strategy 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 Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth Strategy has no effect on the direction of Ford i.e., Ford and Equity Growth go up and down completely randomly.
Pair Corralation between Ford and Equity Growth
Taking into account the 90-day investment horizon Ford is expected to generate 2.72 times less return on investment than Equity Growth. In addition to that, Ford is 3.17 times more volatile than Equity Growth Strategy. It trades about 0.01 of its total potential returns per unit of risk. Equity Growth Strategy is currently generating about 0.08 per unit of volatility. If you would invest 1,209 in Equity Growth Strategy on September 3, 2024 and sell it today you would earn a total of 369.00 from holding Equity Growth Strategy or generate 30.52% 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. Equity Growth Strategy
Performance |
| Timeline |
| Ford Motor |
| Equity Growth Strategy |
Ford and Equity Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Equity Growth
The main advantage of trading using opposite Ford and Equity Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Equity Growth 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 Equity Growth will offset losses from the drop in Equity Growth's long position.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. Ford Motor |
| Equity Growth vs. American Funds The | Equity Growth vs. American Funds The | Equity Growth vs. Income Fund Of | Equity Growth vs. Income Fund Of |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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