Correlation Between Ford and Sandvik AB
Can any of the company-specific risk be diversified away by investing in both Ford and Sandvik AB 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 Sandvik AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Sandvik AB, you can compare the effects of market volatilities on Ford and Sandvik AB 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 Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Sandvik AB.
Diversification Opportunities for Ford and Sandvik AB
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Sandvik is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sandvik AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB 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 Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB has no effect on the direction of Ford i.e., Ford and Sandvik AB go up and down completely randomly.
Pair Corralation between Ford and Sandvik AB
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Sandvik AB. In addition to that, Ford is 1.66 times more volatile than Sandvik AB. It trades about 0.0 of its total potential returns per unit of risk. Sandvik AB is currently generating about 0.0 per unit of volatility. If you would invest 20,588 in Sandvik AB on August 31, 2024 and sell it today you would lose (418.00) from holding Sandvik AB or give up 2.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Ford Motor vs. Sandvik AB
Performance |
| Timeline |
| Ford Motor |
| Sandvik AB |
Ford and Sandvik AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Sandvik AB
The main advantage of trading using opposite Ford and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Sandvik AB 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 Sandvik AB will offset losses from the drop in Sandvik AB's long position.The idea behind Ford Motor and Sandvik AB 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.| Sandvik AB vs. Samhllsbyggnadsbolaget i Norden | Sandvik AB vs. Sinch AB | Sandvik AB vs. Embracer Group AB | Sandvik AB vs. Evolution AB |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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