Correlation Between Ford and Steel Public
Can any of the company-specific risk be diversified away by investing in both Ford and Steel Public 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 Steel Public into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and The Steel Public, you can compare the effects of market volatilities on Ford and Steel Public 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 Steel Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Steel Public.
Diversification Opportunities for Ford and Steel Public
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Steel is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and The Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Public 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 Steel Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Public has no effect on the direction of Ford i.e., Ford and Steel Public go up and down completely randomly.
Pair Corralation between Ford and Steel Public
Taking into account the 90-day investment horizon Ford is expected to generate 53.39 times less return on investment than Steel Public. But when comparing it to its historical volatility, Ford Motor is 19.96 times less risky than Steel Public. It trades about 0.01 of its potential returns per unit of risk. The Steel Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 142.00 in The Steel Public on August 28, 2024 and sell it today you would lose (70.00) from holding The Steel Public or give up 49.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.17% |
| Values | Daily Returns |
Ford Motor vs. The Steel Public
Performance |
| Timeline |
| Ford Motor |
| Steel Public |
Ford and Steel Public Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Steel Public
The main advantage of trading using opposite Ford and Steel Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Steel Public 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 Steel Public will offset losses from the drop in Steel Public's long position.The idea behind Ford Motor and The Steel Public 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.| Steel Public vs. TMT Steel Public | Steel Public vs. Tycoons Worldwide Group | Steel Public vs. Thai German Products Public | Steel Public vs. Siam Steel Service |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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