Correlation Between Ford and San Miguel
Can any of the company-specific risk be diversified away by investing in both Ford and San Miguel 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 San Miguel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and San Miguel, you can compare the effects of market volatilities on Ford and San Miguel 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 San Miguel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and San Miguel.
Diversification Opportunities for Ford and San Miguel
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and San is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and San Miguel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Miguel 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 San Miguel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Miguel has no effect on the direction of Ford i.e., Ford and San Miguel go up and down completely randomly.
Pair Corralation between Ford and San Miguel
Taking into account the 90-day investment horizon Ford is expected to generate 2.68 times less return on investment than San Miguel. But when comparing it to its historical volatility, Ford Motor is 1.79 times less risky than San Miguel. It trades about 0.01 of its potential returns per unit of risk. San Miguel is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 170.00 in San Miguel on September 2, 2024 and sell it today you would lose (8.00) from holding San Miguel or give up 4.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 62.3% |
| Values | Daily Returns |
Ford Motor vs. San Miguel
Performance |
| Timeline |
| Ford Motor |
| San Miguel |
Ford and San Miguel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and San Miguel
The main advantage of trading using opposite Ford and San Miguel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, San Miguel 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 San Miguel will offset losses from the drop in San Miguel's long position.The idea behind Ford Motor and San Miguel 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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