Correlation Between Ford and Stance Equity
Can any of the company-specific risk be diversified away by investing in both Ford and Stance Equity 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 Stance Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Stance Equity ESG, you can compare the effects of market volatilities on Ford and Stance Equity 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 Stance Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Stance Equity.
Diversification Opportunities for Ford and Stance Equity
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Stance is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Stance Equity ESG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stance Equity ESG 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 Stance Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stance Equity ESG has no effect on the direction of Ford i.e., Ford and Stance Equity go up and down completely randomly.
Pair Corralation between Ford and Stance Equity
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.69 times more return on investment than Stance Equity. However, Ford is 2.69 times more volatile than Stance Equity ESG. It trades about 0.18 of its potential returns per unit of risk. Stance Equity ESG is currently generating about 0.3 per unit of risk. If you would invest 1,033 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 80.00 from holding Ford Motor or generate 7.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ford Motor vs. Stance Equity ESG
Performance |
| Timeline |
| Ford Motor |
| Stance Equity ESG |
Ford and Stance Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Stance Equity
The main advantage of trading using opposite Ford and Stance Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Stance Equity 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 Stance Equity will offset losses from the drop in Stance Equity's long position.The idea behind Ford Motor and Stance Equity ESG 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.| Stance Equity vs. iShares ESG Screened | Stance Equity vs. Innovator Equity Accelerated | Stance Equity vs. iShares ESG Screened | Stance Equity vs. Innovator Equity Accelerated |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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