Correlation Between Ford and Subsea 7
Can any of the company-specific risk be diversified away by investing in both Ford and Subsea 7 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 Subsea 7 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Subsea 7 SA, you can compare the effects of market volatilities on Ford and Subsea 7 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 Subsea 7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Subsea 7.
Diversification Opportunities for Ford and Subsea 7
Weak diversification
The 3 months correlation between Ford and Subsea is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Subsea 7 SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Subsea 7 SA 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 Subsea 7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Subsea 7 SA has no effect on the direction of Ford i.e., Ford and Subsea 7 go up and down completely randomly.
Pair Corralation between Ford and Subsea 7
If you would invest 1,220 in Subsea 7 SA on August 27, 2024 and sell it today you would earn a total of 0.00 from holding Subsea 7 SA or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 0.53% |
| Values | Daily Returns |
Ford Motor vs. Subsea 7 SA
Performance |
| Timeline |
| Ford Motor |
| Subsea 7 SA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Subsea 7 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Subsea 7
The main advantage of trading using opposite Ford and Subsea 7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Subsea 7 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 Subsea 7 will offset losses from the drop in Subsea 7's long position.The idea behind Ford Motor and Subsea 7 SA 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.| Subsea 7 vs. Bri Chem Corp | Subsea 7 vs. Pulse Seismic | Subsea 7 vs. Worley Parsons | Subsea 7 vs. Petrofac Ltd ADR |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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