Correlation Between Ford and Wilmar International
Can any of the company-specific risk be diversified away by investing in both Ford and Wilmar International 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 Wilmar International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Wilmar International Limited, you can compare the effects of market volatilities on Ford and Wilmar International 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 Wilmar International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Wilmar International.
Diversification Opportunities for Ford and Wilmar International
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Wilmar is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Wilmar International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmar International 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 Wilmar International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmar International has no effect on the direction of Ford i.e., Ford and Wilmar International go up and down completely randomly.
Pair Corralation between Ford and Wilmar International
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.38 times more return on investment than Wilmar International. However, Ford is 1.38 times more volatile than Wilmar International Limited. It trades about 0.01 of its potential returns per unit of risk. Wilmar International Limited is currently generating about -0.01 per unit of risk. If you would invest 1,138 in Ford Motor on September 2, 2024 and sell it today you would lose (25.00) from holding Ford Motor or give up 2.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.02% |
| Values | Daily Returns |
Ford Motor vs. Wilmar International Limited
Performance |
| Timeline |
| Ford Motor |
| Wilmar International |
Ford and Wilmar International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Wilmar International
The main advantage of trading using opposite Ford and Wilmar International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Wilmar International 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 Wilmar International will offset losses from the drop in Wilmar International's long position.The idea behind Ford Motor and Wilmar International Limited 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.| Wilmar International vs. Wayside Technology Group | Wilmar International vs. Computer And Technologies | Wilmar International vs. AECOM TECHNOLOGY | Wilmar International vs. GUARDANT HEALTH CL |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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