Correlation Between Ford and Solarmax Technology
Can any of the company-specific risk be diversified away by investing in both Ford and Solarmax Technology 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 Solarmax Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Solarmax Technology Common, you can compare the effects of market volatilities on Ford and Solarmax Technology 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 Solarmax Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Solarmax Technology.
Diversification Opportunities for Ford and Solarmax Technology
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Solarmax is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Solarmax Technology Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solarmax Technology 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 Solarmax Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solarmax Technology has no effect on the direction of Ford i.e., Ford and Solarmax Technology go up and down completely randomly.
Pair Corralation between Ford and Solarmax Technology
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Solarmax Technology. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.43 times less risky than Solarmax Technology. The stock trades about -0.05 of its potential returns per unit of risk. The Solarmax Technology Common is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 120.00 in Solarmax Technology Common on January 9, 2025 and sell it today you would lose (6.00) from holding Solarmax Technology Common or give up 5.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Solarmax Technology Common
Performance |
| Timeline |
| Ford Motor |
| Solarmax Technology |
Ford and Solarmax Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Solarmax Technology
The main advantage of trading using opposite Ford and Solarmax Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Solarmax Technology 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 Solarmax Technology will offset losses from the drop in Solarmax Technology's long position.The idea behind Ford Motor and Solarmax Technology Common 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.| Solarmax Technology vs. Broadleaf Co | Solarmax Technology vs. Nathans Famous | Solarmax Technology vs. McDonalds | Solarmax Technology vs. Texas Roadhouse |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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