Correlation Between Ford and Telephone
Can any of the company-specific risk be diversified away by investing in both Ford and Telephone 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 Telephone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Telephone and Data, you can compare the effects of market volatilities on Ford and Telephone 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 Telephone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Telephone.
Diversification Opportunities for Ford and Telephone
Very good diversification
The 3 months correlation between Ford and Telephone is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Telephone and Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telephone and Data 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 Telephone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telephone and Data has no effect on the direction of Ford i.e., Ford and Telephone go up and down completely randomly.
Pair Corralation between Ford and Telephone
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Telephone. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.6 times less risky than Telephone. The stock trades about -0.01 of its potential returns per unit of risk. The Telephone and Data is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,813 in Telephone and Data on November 9, 2024 and sell it today you would earn a total of 1,884 from holding Telephone and Data or generate 103.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Telephone and Data
Performance |
| Timeline |
| Ford Motor |
| Telephone and Data |
Ford and Telephone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Telephone
The main advantage of trading using opposite Ford and Telephone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Telephone 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 Telephone will offset losses from the drop in Telephone's long position.The idea behind Ford Motor and Telephone and Data 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.| Telephone vs. Telephone and Data | Telephone vs. Shenandoah Telecommunications Co | Telephone vs. WideOpenWest | Telephone vs. ATN International |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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