Correlation Between Ford and Science Applications
Can any of the company-specific risk be diversified away by investing in both Ford and Science Applications 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 Science Applications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Science Applications International, you can compare the effects of market volatilities on Ford and Science Applications 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 Science Applications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Science Applications.
Diversification Opportunities for Ford and Science Applications
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Science is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications 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 Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of Ford i.e., Ford and Science Applications go up and down completely randomly.
Pair Corralation between Ford and Science Applications
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.75 times more return on investment than Science Applications. However, Ford Motor is 1.34 times less risky than Science Applications. It trades about 0.0 of its potential returns per unit of risk. Science Applications International is currently generating about -0.16 per unit of risk. If you would invest 1,091 in Ford Motor on August 24, 2024 and sell it today you would lose (11.00) from holding Ford Motor or give up 1.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Science Applications Internati
Performance |
| Timeline |
| Ford Motor |
| Science Applications |
Ford and Science Applications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Science Applications
The main advantage of trading using opposite Ford and Science Applications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Science Applications 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 Science Applications will offset losses from the drop in Science Applications' long position.The idea behind Ford Motor and Science Applications International 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.| Science Applications vs. CACI International | Science Applications vs. CDW Corp | Science Applications vs. Gartner | Science Applications vs. Jack Henry Associates |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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