Correlation Between Ford and Spectris Plc
Can any of the company-specific risk be diversified away by investing in both Ford and Spectris Plc 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 Spectris Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Spectris plc, you can compare the effects of market volatilities on Ford and Spectris Plc 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 Spectris Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Spectris Plc.
Diversification Opportunities for Ford and Spectris Plc
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Spectris is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Spectris plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectris plc 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 Spectris Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectris plc has no effect on the direction of Ford i.e., Ford and Spectris Plc go up and down completely randomly.
Pair Corralation between Ford and Spectris Plc
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.71 times more return on investment than Spectris Plc. However, Ford Motor is 1.41 times less risky than Spectris Plc. It trades about 0.0 of its potential returns per unit of risk. Spectris plc is currently generating about -0.04 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 Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Spectris plc
Performance |
| Timeline |
| Ford Motor |
| Spectris plc |
Ford and Spectris Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Spectris Plc
The main advantage of trading using opposite Ford and Spectris Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Spectris Plc 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 Spectris Plc will offset losses from the drop in Spectris Plc's long position.The idea behind Ford Motor and Spectris plc 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.| Spectris Plc vs. Track Group | Spectris Plc vs. Sono Tek Corp | Spectris Plc vs. Mind Technology | Spectris Plc vs. Electro Sensors |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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