Correlation Between Ford and AMERICAN
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By analyzing existing cross correlation between Ford Motor and AMERICAN HOMES 4, you can compare the effects of market volatilities on Ford and AMERICAN 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 AMERICAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and AMERICAN.
Diversification Opportunities for Ford and AMERICAN
Very good diversification
The 3 months correlation between Ford and AMERICAN is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AMERICAN HOMES 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN HOMES 4 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN HOMES 4 has no effect on the direction of Ford i.e., Ford and AMERICAN go up and down completely randomly.
Pair Corralation between Ford and AMERICAN
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.88 times more return on investment than AMERICAN. However, Ford is 2.88 times more volatile than AMERICAN HOMES 4. It trades about 0.23 of its potential returns per unit of risk. AMERICAN HOMES 4 is currently generating about -0.13 per unit of risk. If you would invest 1,015 in Ford Motor on September 1, 2024 and sell it today you would earn a total of 98.00 from holding Ford Motor or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Ford Motor vs. AMERICAN HOMES 4
Performance |
| Timeline |
| Ford Motor |
| AMERICAN HOMES 4 |
Ford and AMERICAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and AMERICAN
The main advantage of trading using opposite Ford and AMERICAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, AMERICAN 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 AMERICAN will offset losses from the drop in AMERICAN's long position.The idea behind Ford Motor and AMERICAN HOMES 4 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.| AMERICAN vs. AEP TEX INC | AMERICAN vs. US BANK NATIONAL | AMERICAN vs. American Express | AMERICAN vs. Chevron Corp |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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