Correlation Between Ford and SGF Capital
Can any of the company-specific risk be diversified away by investing in both Ford and SGF Capital 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 SGF Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and SGF Capital Public, you can compare the effects of market volatilities on Ford and SGF Capital 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 SGF Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and SGF Capital.
Diversification Opportunities for Ford and SGF Capital
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ford and SGF is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and SGF Capital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGF Capital Public 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 SGF Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGF Capital Public has no effect on the direction of Ford i.e., Ford and SGF Capital go up and down completely randomly.
Pair Corralation between Ford and SGF Capital
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.47 times more return on investment than SGF Capital. However, Ford Motor is 2.13 times less risky than SGF Capital. It trades about -0.06 of its potential returns per unit of risk. SGF Capital Public is currently generating about -0.15 per unit of risk. If you would invest 976.00 in Ford Motor on November 29, 2024 and sell it today you would lose (29.00) from holding Ford Motor or give up 2.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. SGF Capital Public
Performance |
| Timeline |
| Ford Motor |
| SGF Capital Public |
Ford and SGF Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and SGF Capital
The main advantage of trading using opposite Ford and SGF Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, SGF Capital 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 SGF Capital will offset losses from the drop in SGF Capital's long position.The idea behind Ford Motor and SGF Capital Public 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.| SGF Capital vs. Power Solution Technologies | SGF Capital vs. RS Public | SGF Capital vs. Siam Steel International | SGF Capital vs. RPCG Public |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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