Correlation Between Ford and B Riley
Can any of the company-specific risk be diversified away by investing in both Ford and B Riley 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 B Riley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and B Riley Financial, you can compare the effects of market volatilities on Ford and B Riley 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 B Riley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and B Riley.
Diversification Opportunities for Ford and B Riley
Good diversification
The 3 months correlation between Ford and RILYG is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and B Riley Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Riley Financial 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 B Riley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Riley Financial has no effect on the direction of Ford i.e., Ford and B Riley go up and down completely randomly.
Pair Corralation between Ford and B Riley
Taking into account the 90-day investment horizon Ford is expected to generate 5.37 times less return on investment than B Riley. But when comparing it to its historical volatility, Ford Motor is 1.22 times less risky than B Riley. It trades about 0.02 of its potential returns per unit of risk. B Riley Financial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,148 in B Riley Financial on October 26, 2024 and sell it today you would earn a total of 42.00 from holding B Riley Financial or generate 3.66% 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. B Riley Financial
Performance |
| Timeline |
| Ford Motor |
| B Riley Financial |
Ford and B Riley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and B Riley
The main advantage of trading using opposite Ford and B Riley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, B Riley 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 B Riley will offset losses from the drop in B Riley's long position.The idea behind Ford Motor and B Riley Financial 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.| B Riley vs. B Riley Financial | B Riley vs. B Riley Financial | B Riley vs. B Riley Financial, | B Riley vs. B Riley Financial |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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