Correlation Between Ford and Sabio Holdings
Can any of the company-specific risk be diversified away by investing in both Ford and Sabio Holdings 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 Sabio Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Sabio Holdings, you can compare the effects of market volatilities on Ford and Sabio Holdings 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 Sabio Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Sabio Holdings.
Diversification Opportunities for Ford and Sabio Holdings
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Sabio is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sabio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabio Holdings 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 Sabio Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabio Holdings has no effect on the direction of Ford i.e., Ford and Sabio Holdings go up and down completely randomly.
Pair Corralation between Ford and Sabio Holdings
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.37 times more return on investment than Sabio Holdings. However, Ford Motor is 2.69 times less risky than Sabio Holdings. It trades about 0.04 of its potential returns per unit of risk. Sabio Holdings is currently generating about -0.01 per unit of risk. If you would invest 1,122 in Ford Motor on August 28, 2024 and sell it today you would earn a total of 18.00 from holding Ford Motor or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Sabio Holdings
Performance |
| Timeline |
| Ford Motor |
| Sabio Holdings |
Ford and Sabio Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Sabio Holdings
The main advantage of trading using opposite Ford and Sabio Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Sabio Holdings 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 Sabio Holdings will offset losses from the drop in Sabio Holdings' long position.The idea behind Ford Motor and Sabio Holdings 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.| Sabio Holdings vs. Microsoft Corp CDR | Sabio Holdings vs. Apple Inc CDR | Sabio Holdings vs. Alphabet Inc CDR | Sabio Holdings vs. Amazon CDR |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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