Correlation Between Ford and United Parcel
Can any of the company-specific risk be diversified away by investing in both Ford and United Parcel 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 United Parcel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and United Parcel Service, you can compare the effects of market volatilities on Ford and United Parcel 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 United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and United Parcel.
Diversification Opportunities for Ford and United Parcel
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and United is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Ford i.e., Ford and United Parcel go up and down completely randomly.
Pair Corralation between Ford and United Parcel
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.44 times more return on investment than United Parcel. However, Ford is 1.44 times more volatile than United Parcel Service. It trades about 0.22 of its potential returns per unit of risk. United Parcel Service is currently generating about 0.29 per unit of risk. If you would invest 1,022 in Ford Motor on September 3, 2024 and sell it today you would earn a total of 91.00 from holding Ford Motor or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Ford Motor vs. United Parcel Service
Performance |
| Timeline |
| Ford Motor |
| United Parcel Service |
Ford and United Parcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and United Parcel
The main advantage of trading using opposite Ford and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. Ford Motor |
| United Parcel vs. FedEx | United Parcel vs. Sequoia Logstica e | United Parcel vs. Energisa SA | United Parcel vs. BTG Pactual Logstica |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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