Correlation Between Ford and Templeton Emerging
Can any of the company-specific risk be diversified away by investing in both Ford and Templeton 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 Templeton 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 Templeton Emerging Mkt, you can compare the effects of market volatilities on Ford and Templeton 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 Templeton Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Templeton Emerging.
Diversification Opportunities for Ford and Templeton Emerging
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Templeton is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Templeton Emerging Mkt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Emerging Mkt 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 Templeton Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Emerging Mkt has no effect on the direction of Ford i.e., Ford and Templeton Emerging go up and down completely randomly.
Pair Corralation between Ford and Templeton Emerging
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Templeton Emerging. In addition to that, Ford is 4.12 times more volatile than Templeton Emerging Mkt. It trades about -0.02 of its total potential returns per unit of risk. Templeton Emerging Mkt is currently generating about -0.01 per unit of volatility. If you would invest 650.00 in Templeton Emerging Mkt on November 3, 2024 and sell it today you would lose (8.00) from holding Templeton Emerging Mkt or give up 1.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.18% |
| Values | Daily Returns |
Ford Motor vs. Templeton Emerging Mkt
Performance |
| Timeline |
| Ford Motor |
| Templeton Emerging Mkt |
Ford and Templeton Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Templeton Emerging
The main advantage of trading using opposite Ford and Templeton Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Templeton 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 Templeton Emerging will offset losses from the drop in Templeton Emerging's long position.The idea behind Ford Motor and Templeton Emerging Mkt 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.| Templeton Emerging vs. Groupama Entreprises N | Templeton Emerging vs. Renaissance Europe C | Templeton Emerging vs. Superior Plus Corp | Templeton Emerging vs. Origin Agritech |
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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