Correlation Between Ford and Voestalpine
Can any of the company-specific risk be diversified away by investing in both Ford and Voestalpine 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 Voestalpine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Voestalpine AG PK, you can compare the effects of market volatilities on Ford and Voestalpine 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 Voestalpine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Voestalpine.
Diversification Opportunities for Ford and Voestalpine
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Voestalpine is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Voestalpine AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voestalpine AG PK 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 Voestalpine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voestalpine AG PK has no effect on the direction of Ford i.e., Ford and Voestalpine go up and down completely randomly.
Pair Corralation between Ford and Voestalpine
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.81 times more return on investment than Voestalpine. However, Ford Motor is 1.23 times less risky than Voestalpine. It trades about 0.0 of its potential returns per unit of risk. Voestalpine AG PK is currently generating about -0.02 per unit of risk. If you would invest 1,146 in Ford Motor on September 19, 2024 and sell it today you would lose (147.00) from holding Ford Motor or give up 12.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Voestalpine AG PK
Performance |
| Timeline |
| Ford Motor |
| Voestalpine AG PK |
Ford and Voestalpine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Voestalpine
The main advantage of trading using opposite Ford and Voestalpine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Voestalpine 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 Voestalpine will offset losses from the drop in Voestalpine's long position.The idea behind Ford Motor and Voestalpine AG PK 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.| Voestalpine vs. Gerdau SA ADR | Voestalpine vs. Usinas Siderurgicas de | Voestalpine vs. Ternium SA ADR | Voestalpine vs. POSCO Holdings |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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