Correlation Between Ford and PT Steel
Can any of the company-specific risk be diversified away by investing in both Ford and PT Steel 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 PT Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and PT Steel Pipe, you can compare the effects of market volatilities on Ford and PT Steel 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 PT Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and PT Steel.
Diversification Opportunities for Ford and PT Steel
Very weak diversification
The 3 months correlation between Ford and S08 is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and PT Steel Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Steel Pipe 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 PT Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Steel Pipe has no effect on the direction of Ford i.e., Ford and PT Steel go up and down completely randomly.
Pair Corralation between Ford and PT Steel
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.49 times more return on investment than PT Steel. However, Ford Motor is 2.03 times less risky than PT Steel. It trades about -0.02 of its potential returns per unit of risk. PT Steel Pipe is currently generating about -0.03 per unit of risk. If you would invest 1,083 in Ford Motor on November 2, 2024 and sell it today you would lose (67.00) from holding Ford Motor or give up 6.19% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Ford Motor vs. PT Steel Pipe
Performance |
Timeline |
Ford Motor |
PT Steel Pipe |
Ford and PT Steel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and PT Steel
The main advantage of trading using opposite Ford and PT Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, PT Steel 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 PT Steel will offset losses from the drop in PT Steel's long position.The idea behind Ford Motor and PT Steel Pipe 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.PT Steel vs. HANOVER INSURANCE | PT Steel vs. United Insurance Holdings | PT Steel vs. CITY OFFICE REIT | PT Steel vs. Corporate Office Properties |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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