Correlation Between Ford and Transamerica Emerging
Can any of the company-specific risk be diversified away by investing in both Ford and Transamerica Emerging 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 Transamerica Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Transamerica Emerging Markets, you can compare the effects of market volatilities on Ford and Transamerica Emerging 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 Transamerica Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Transamerica Emerging.
Diversification Opportunities for Ford and Transamerica Emerging
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Transamerica is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Transamerica Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Emerging 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 Transamerica Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Emerging has no effect on the direction of Ford i.e., Ford and Transamerica Emerging go up and down completely randomly.
Pair Corralation between Ford and Transamerica Emerging
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.59 times more return on investment than Transamerica Emerging. However, Ford is 2.59 times more volatile than Transamerica Emerging Markets. It trades about 0.01 of its potential returns per unit of risk. Transamerica Emerging Markets is currently generating about 0.02 per unit of risk. If you would invest 1,115 in Ford Motor on August 30, 2024 and sell it today you would lose (5.00) from holding Ford Motor or give up 0.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Transamerica Emerging Markets
Performance |
| Timeline |
| Ford Motor |
| Transamerica Emerging |
Ford and Transamerica Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Transamerica Emerging
The main advantage of trading using opposite Ford and Transamerica Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Transamerica Emerging 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 Transamerica Emerging will offset losses from the drop in Transamerica Emerging's long position.The idea behind Ford Motor and Transamerica Emerging Markets 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.| Transamerica Emerging vs. Vanguard Emerging Markets | Transamerica Emerging vs. Vanguard Emerging Markets | Transamerica Emerging vs. HUMANA INC | Transamerica Emerging vs. Aquagold 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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