Correlation Between Ford and Rocket Companies
Can any of the company-specific risk be diversified away by investing in both Ford and Rocket Companies 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 Rocket Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Rocket Companies, you can compare the effects of market volatilities on Ford and Rocket Companies 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 Rocket Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Rocket Companies.
Diversification Opportunities for Ford and Rocket Companies
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Rocket is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Rocket Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocket Companies 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 Rocket Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocket Companies has no effect on the direction of Ford i.e., Ford and Rocket Companies go up and down completely randomly.
Pair Corralation between Ford and Rocket Companies
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.11 times more return on investment than Rocket Companies. However, Ford is 1.11 times more volatile than Rocket Companies. It trades about 0.03 of its potential returns per unit of risk. Rocket Companies is currently generating about -0.34 per unit of risk. If you would invest 1,109 in Ford Motor on August 25, 2024 and sell it today you would earn a total of 9.00 from holding Ford Motor or generate 0.81% 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. Rocket Companies
Performance |
| Timeline |
| Ford Motor |
| Rocket Companies |
Ford and Rocket Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Rocket Companies
The main advantage of trading using opposite Ford and Rocket Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Rocket Companies 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 Rocket Companies will offset losses from the drop in Rocket Companies' long position.The idea behind Ford Motor and Rocket Companies 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.| Rocket Companies vs. Loandepot | Rocket Companies vs. Mr Cooper Group | Rocket Companies vs. PennyMac Finl Svcs | Rocket Companies vs. Guild Holdings 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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