Correlation Between Ford and Universal Technical
Can any of the company-specific risk be diversified away by investing in both Ford and Universal Technical 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 Universal Technical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Universal Technical Institute, you can compare the effects of market volatilities on Ford and Universal Technical 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 Universal Technical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Universal Technical.
Diversification Opportunities for Ford and Universal Technical
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Universal is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Universal Technical Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Technical 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 Universal Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Technical has no effect on the direction of Ford i.e., Ford and Universal Technical go up and down completely randomly.
Pair Corralation between Ford and Universal Technical
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Universal Technical. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.97 times less risky than Universal Technical. The stock trades about -0.2 of its potential returns per unit of risk. The Universal Technical Institute is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,380 in Universal Technical Institute on October 7, 2024 and sell it today you would earn a total of 80.00 from holding Universal Technical Institute or generate 3.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 85.0% |
| Values | Daily Returns |
Ford Motor vs. Universal Technical Institute
Performance |
| Timeline |
| Ford Motor |
| Universal Technical |
Ford and Universal Technical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Universal Technical
The main advantage of trading using opposite Ford and Universal Technical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Universal Technical 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 Universal Technical will offset losses from the drop in Universal Technical's long position.The idea behind Ford Motor and Universal Technical Institute 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.| Universal Technical vs. ONWARD MEDICAL BV | Universal Technical vs. CompuGroup Medical SE | Universal Technical vs. GLOBUS MEDICAL A | Universal Technical vs. Jupiter Fund Management |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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