Correlation Between Ford and Safe
Can any of the company-specific risk be diversified away by investing in both Ford and Safe 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 Safe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Safe and Green, you can compare the effects of market volatilities on Ford and Safe 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 Safe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Safe.
Diversification Opportunities for Ford and Safe
Very good diversification
The 3 months correlation between Ford and Safe is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Safe and Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safe and Green 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 Safe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safe and Green has no effect on the direction of Ford i.e., Ford and Safe go up and down completely randomly.
Pair Corralation between Ford and Safe
Taking into account the 90-day investment horizon Ford is expected to generate 14.17 times less return on investment than Safe. But when comparing it to its historical volatility, Ford Motor is 14.47 times less risky than Safe. It trades about 0.01 of its potential returns per unit of risk. Safe and Green is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 13,200 in Safe and Green on August 31, 2024 and sell it today you would lose (12,975) from holding Safe and Green or give up 98.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 63.39% |
| Values | Daily Returns |
Ford Motor vs. Safe and Green
Performance |
| Timeline |
| Ford Motor |
| Safe and Green |
Ford and Safe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Safe
The main advantage of trading using opposite Ford and Safe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Safe 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 Safe will offset losses from the drop in Safe's long position.The idea behind Ford Motor and Safe and Green 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.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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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