Correlation Between Ford and Round One
Can any of the company-specific risk be diversified away by investing in both Ford and Round One 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 Round One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Round One, you can compare the effects of market volatilities on Ford and Round One 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 Round One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Round One.
Diversification Opportunities for Ford and Round One
Very good diversification
The 3 months correlation between Ford and Round is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Round One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Round One 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 Round One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Round One has no effect on the direction of Ford i.e., Ford and Round One go up and down completely randomly.
Pair Corralation between Ford and Round One
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.02 times more return on investment than Round One. However, Ford Motor is 51.55 times less risky than Round One. It trades about 0.02 of its potential returns per unit of risk. Round One is currently generating about -0.12 per unit of risk. If you would invest 947.00 in Ford Motor on September 14, 2024 and sell it today you would earn a total of 94.00 from holding Ford Motor or generate 9.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 30.1% |
| Values | Daily Returns |
Ford Motor vs. Round One
Performance |
| Timeline |
| Ford Motor |
| Round One |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Round One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Round One
The main advantage of trading using opposite Ford and Round One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Round One 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 Round One will offset losses from the drop in Round One's long position.The idea behind Ford Motor and Round One 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.| Round One vs. Six Flags Entertainment | Round One vs. Johnson Outdoors | Round One vs. Acushnet Holdings Corp | Round One vs. Mattel Inc |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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