Correlation Between Ford and UNIV HEALTH
Can any of the company-specific risk be diversified away by investing in both Ford and UNIV HEALTH 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 UNIV HEALTH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and UNIV HEALTH SERV B, you can compare the effects of market volatilities on Ford and UNIV HEALTH 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 UNIV HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and UNIV HEALTH.
Diversification Opportunities for Ford and UNIV HEALTH
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and UNIV is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and UNIV HEALTH SERV B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIV HEALTH SERV 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 UNIV HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIV HEALTH SERV has no effect on the direction of Ford i.e., Ford and UNIV HEALTH go up and down completely randomly.
Pair Corralation between Ford and UNIV HEALTH
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.99 times more return on investment than UNIV HEALTH. However, Ford Motor is 1.01 times less risky than UNIV HEALTH. It trades about 0.18 of its potential returns per unit of risk. UNIV HEALTH SERV B is currently generating about 0.09 per unit of risk. If you would invest 1,027 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 83.00 from holding Ford Motor or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. UNIV HEALTH SERV B
Performance |
| Timeline |
| Ford Motor |
| UNIV HEALTH SERV |
Ford and UNIV HEALTH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and UNIV HEALTH
The main advantage of trading using opposite Ford and UNIV HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, UNIV HEALTH 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 UNIV HEALTH will offset losses from the drop in UNIV HEALTH's long position.The idea behind Ford Motor and UNIV HEALTH SERV B 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.| UNIV HEALTH vs. SPARTAN STORES | UNIV HEALTH vs. Evolution Mining Limited | UNIV HEALTH vs. Retail Estates NV | UNIV HEALTH vs. BJs Wholesale Club |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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