Correlation Between Ford and US Silica
Can any of the company-specific risk be diversified away by investing in both Ford and US Silica 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 US Silica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and US Silica Holdings, you can compare the effects of market volatilities on Ford and US Silica 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 US Silica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and US Silica.
Diversification Opportunities for Ford and US Silica
Good diversification
The 3 months correlation between Ford and SLCA is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and US Silica Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Silica 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 US Silica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Silica Holdings has no effect on the direction of Ford i.e., Ford and US Silica go up and down completely randomly.
Pair Corralation between Ford and US Silica
If you would invest 988.00 in Ford Motor on October 21, 2024 and sell it today you would earn a total of 30.00 from holding Ford Motor or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Ford Motor vs. US Silica Holdings
Performance |
| Timeline |
| Ford Motor |
| US Silica Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and US Silica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and US Silica
The main advantage of trading using opposite Ford and US Silica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, US Silica 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 US Silica will offset losses from the drop in US Silica's long position.The idea behind Ford Motor and US Silica 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.| US Silica vs. North American Construction | US Silica vs. ProPetro Holding Corp | US Silica vs. Ranger Energy Services | US Silica vs. Cactus Inc |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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