Correlation Between Ford and Step One
Can any of the company-specific risk be diversified away by investing in both Ford and Step One 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 Step One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Step One Clothing, you can compare the effects of market volatilities on Ford and Step One 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 Step One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Step One.
Diversification Opportunities for Ford and Step One
Very weak diversification
The 3 months correlation between Ford and Step is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Step One Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Step One Clothing 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 Step One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Step One Clothing has no effect on the direction of Ford i.e., Ford and Step One go up and down completely randomly.
Pair Corralation between Ford and Step One
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.77 times more return on investment than Step One. However, Ford Motor is 1.3 times less risky than Step One. It trades about -0.01 of its potential returns per unit of risk. Step One Clothing is currently generating about -0.14 per unit of risk. If you would invest 1,061 in Ford Motor on October 31, 2024 and sell it today you would lose (40.00) from holding Ford Motor or give up 3.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
Ford Motor vs. Step One Clothing
Performance |
| Timeline |
| Ford Motor |
| Step One Clothing |
Ford and Step One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Step One
The main advantage of trading using opposite Ford and Step One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Step One 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 Step One will offset losses from the drop in Step One's long position.The idea behind Ford Motor and Step One Clothing 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.| Step One vs. BSP Financial Group | Step One vs. Bisalloy Steel Group | Step One vs. Qbe Insurance Group | Step One vs. Iron Road |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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