Correlation Between Ford and USA Equities
Can any of the company-specific risk be diversified away by investing in both Ford and USA Equities 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 USA Equities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and USA Equities Corp, you can compare the effects of market volatilities on Ford and USA Equities 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 USA Equities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and USA Equities.
Diversification Opportunities for Ford and USA Equities
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and USA is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and USA Equities Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USA Equities Corp 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 USA Equities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USA Equities Corp has no effect on the direction of Ford i.e., Ford and USA Equities go up and down completely randomly.
Pair Corralation between Ford and USA Equities
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the USA Equities. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 5.78 times less risky than USA Equities. The stock trades about -0.01 of its potential returns per unit of risk. The USA Equities Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 18.00 in USA Equities Corp on August 29, 2024 and sell it today you would earn a total of 0.00 from holding USA Equities Corp or generate 0.0% 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. USA Equities Corp
Performance |
| Timeline |
| Ford Motor |
| USA Equities Corp |
Ford and USA Equities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and USA Equities
The main advantage of trading using opposite Ford and USA Equities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, USA Equities 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 USA Equities will offset losses from the drop in USA Equities' long position.The idea behind Ford Motor and USA Equities Corp 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.| USA Equities vs. Brainsway | USA Equities vs. Venus Concept | USA Equities vs. Tactile Systems Technology | USA Equities vs. Icecure Medical |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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