Correlation Between Ford and Renew Energy
Can any of the company-specific risk be diversified away by investing in both Ford and Renew Energy 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 Renew Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Renew Energy Global, you can compare the effects of market volatilities on Ford and Renew Energy 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 Renew Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Renew Energy.
Diversification Opportunities for Ford and Renew Energy
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Renew is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Renew Energy Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renew Energy Global 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 Renew Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renew Energy Global has no effect on the direction of Ford i.e., Ford and Renew Energy go up and down completely randomly.
Pair Corralation between Ford and Renew Energy
Taking into account the 90-day investment horizon Ford is expected to generate 8.57 times less return on investment than Renew Energy. In addition to that, Ford is 1.11 times more volatile than Renew Energy Global. It trades about 0.01 of its total potential returns per unit of risk. Renew Energy Global is currently generating about 0.07 per unit of volatility. If you would invest 596.00 in Renew Energy Global on August 27, 2024 and sell it today you would earn a total of 17.00 from holding Renew Energy Global or generate 2.85% 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. Renew Energy Global
Performance |
| Timeline |
| Ford Motor |
| Renew Energy Global |
Ford and Renew Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Renew Energy
The main advantage of trading using opposite Ford and Renew Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Renew Energy 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 Renew Energy will offset losses from the drop in Renew Energy's long position.The idea behind Ford Motor and Renew Energy Global 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.| Renew Energy vs. Fusion Fuel Green | Renew Energy vs. Advent Technologies Holdings | Renew Energy vs. Eos Energy Enterprises | Renew Energy vs. CuriosityStream |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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