Correlation Between Ford and Beijing Tong
Can any of the company-specific risk be diversified away by investing in both Ford and Beijing Tong 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 Beijing Tong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Beijing Tong Ren, you can compare the effects of market volatilities on Ford and Beijing Tong 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 Beijing Tong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Beijing Tong.
Diversification Opportunities for Ford and Beijing Tong
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Beijing is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Beijing Tong Ren in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Tong Ren 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 Beijing Tong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Tong Ren has no effect on the direction of Ford i.e., Ford and Beijing Tong go up and down completely randomly.
Pair Corralation between Ford and Beijing Tong
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Beijing Tong. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.07 times less risky than Beijing Tong. The stock trades about -0.18 of its potential returns per unit of risk. The Beijing Tong Ren is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 97.00 in Beijing Tong Ren on October 26, 2024 and sell it today you would lose (1.00) from holding Beijing Tong Ren or give up 1.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.5% |
| Values | Daily Returns |
Ford Motor vs. Beijing Tong Ren
Performance |
| Timeline |
| Ford Motor |
| Beijing Tong Ren |
Ford and Beijing Tong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Beijing Tong
The main advantage of trading using opposite Ford and Beijing Tong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Beijing Tong 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 Beijing Tong will offset losses from the drop in Beijing Tong's long position.The idea behind Ford Motor and Beijing Tong Ren 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.| Beijing Tong vs. Universal Health Realty | Beijing Tong vs. Planet Fitness | Beijing Tong vs. NIGHTINGALE HEALTH EO | Beijing Tong vs. NEWELL RUBBERMAID |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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