Correlation Between Ford and Regional Health
Can any of the company-specific risk be diversified away by investing in both Ford and Regional Health 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 Regional Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Regional Health Properties, you can compare the effects of market volatilities on Ford and Regional Health 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 Regional Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Regional Health.
Diversification Opportunities for Ford and Regional Health
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Regional is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Regional Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Health Prop 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 Regional Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Health Prop has no effect on the direction of Ford i.e., Ford and Regional Health go up and down completely randomly.
Pair Corralation between Ford and Regional Health
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.26 times more return on investment than Regional Health. However, Ford Motor is 3.88 times less risky than Regional Health. It trades about 0.23 of its potential returns per unit of risk. Regional Health Properties is currently generating about 0.04 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Regional Health Properties
Performance |
| Timeline |
| Ford Motor |
| Regional Health Prop |
Ford and Regional Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Regional Health
The main advantage of trading using opposite Ford and Regional Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Regional Health 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 Regional Health will offset losses from the drop in Regional Health's long position.The idea behind Ford Motor and Regional Health Properties 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.| Regional Health vs. Ramsay Health Care | Regional Health vs. Jack Nathan Medical | Regional Health vs. Nova Leap Health | Regional Health vs. Fresenius SE Co |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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