Correlation Between Ford and Saia
Can any of the company-specific risk be diversified away by investing in both Ford and Saia 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 Saia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Saia Inc, you can compare the effects of market volatilities on Ford and Saia 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 Saia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Saia.
Diversification Opportunities for Ford and Saia
Modest diversification
The 3 months correlation between Ford and Saia is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Saia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saia Inc 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 Saia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saia Inc has no effect on the direction of Ford i.e., Ford and Saia go up and down completely randomly.
Pair Corralation between Ford and Saia
Taking into account the 90-day investment horizon Ford is expected to generate 2.09 times less return on investment than Saia. But when comparing it to its historical volatility, Ford Motor is 1.41 times less risky than Saia. It trades about 0.04 of its potential returns per unit of risk. Saia Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 39,039 in Saia Inc on August 26, 2024 and sell it today you would earn a total of 15,130 from holding Saia Inc or generate 38.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Saia Inc
Performance |
| Timeline |
| Ford Motor |
| Saia Inc |
Ford and Saia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Saia
The main advantage of trading using opposite Ford and Saia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Saia 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 Saia will offset losses from the drop in Saia's long position.The idea behind Ford Motor and Saia Inc 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.| Saia vs. Old Dominion Freight | Saia vs. ArcBest Corp | Saia vs. Knight Transportation | Saia vs. Universal Logistics Holdings |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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