Correlation Between Ford and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Ford and Smithson Investment 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 Smithson Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Smithson Investment Trust, you can compare the effects of market volatilities on Ford and Smithson Investment 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 Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Smithson Investment.
Diversification Opportunities for Ford and Smithson Investment
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ford and Smithson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust 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 Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Ford i.e., Ford and Smithson Investment go up and down completely randomly.
Pair Corralation between Ford and Smithson Investment
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.07 times more return on investment than Smithson Investment. However, Ford is 2.07 times more volatile than Smithson Investment Trust. It trades about 0.16 of its potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.24 per unit of risk. If you would invest 965.00 in Ford Motor on November 2, 2024 and sell it today you would earn a total of 51.00 from holding Ford Motor or generate 5.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Ford Motor vs. Smithson Investment Trust
Performance |
| Timeline |
| Ford Motor |
| Smithson Investment Trust |
Ford and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Smithson Investment
The main advantage of trading using opposite Ford and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.The idea behind Ford Motor and Smithson Investment Trust 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.| Smithson Investment vs. Global Net Lease | Smithson Investment vs. Bankers Investment Trust | Smithson Investment vs. BlackRock Frontiers Investment | Smithson Investment vs. CAP LEASE AVIATION |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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