Correlation Between Ford and Strategic Allocation
Can any of the company-specific risk be diversified away by investing in both Ford and Strategic Allocation 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 Strategic Allocation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Strategic Allocation Servative, you can compare the effects of market volatilities on Ford and Strategic Allocation 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 Strategic Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Strategic Allocation.
Diversification Opportunities for Ford and Strategic Allocation
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Strategic is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Strategic Allocation Servative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Allocation 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 Strategic Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Allocation has no effect on the direction of Ford i.e., Ford and Strategic Allocation go up and down completely randomly.
Pair Corralation between Ford and Strategic Allocation
Taking into account the 90-day investment horizon Ford Motor is expected to generate 6.7 times more return on investment than Strategic Allocation. However, Ford is 6.7 times more volatile than Strategic Allocation Servative. It trades about 0.09 of its potential returns per unit of risk. Strategic Allocation Servative is currently generating about 0.08 per unit of risk. If you would invest 1,064 in Ford Motor on August 28, 2024 and sell it today you would earn a total of 76.00 from holding Ford Motor or generate 7.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Strategic Allocation Servative
Performance |
| Timeline |
| Ford Motor |
| Strategic Allocation |
Ford and Strategic Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Strategic Allocation
The main advantage of trading using opposite Ford and Strategic Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Strategic Allocation 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 Strategic Allocation will offset losses from the drop in Strategic Allocation's long position.The idea behind Ford Motor and Strategic Allocation Servative 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.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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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