Correlation Between Ford and Vietnam Dairy
Can any of the company-specific risk be diversified away by investing in both Ford and Vietnam Dairy 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 Vietnam Dairy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Vietnam Dairy Products, you can compare the effects of market volatilities on Ford and Vietnam Dairy 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 Vietnam Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Vietnam Dairy.
Diversification Opportunities for Ford and Vietnam Dairy
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Vietnam is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Vietnam Dairy Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Dairy Products 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 Vietnam Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Dairy Products has no effect on the direction of Ford i.e., Ford and Vietnam Dairy go up and down completely randomly.
Pair Corralation between Ford and Vietnam Dairy
Taking into account the 90-day investment horizon Ford Motor is expected to generate 3.68 times more return on investment than Vietnam Dairy. However, Ford is 3.68 times more volatile than Vietnam Dairy Products. It trades about 0.05 of its potential returns per unit of risk. Vietnam Dairy Products is currently generating about -0.33 per unit of risk. If you would invest 1,091 in Ford Motor on August 24, 2024 and sell it today you would earn a total of 27.00 from holding Ford Motor or generate 2.47% 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. Vietnam Dairy Products
Performance |
| Timeline |
| Ford Motor |
| Vietnam Dairy Products |
Ford and Vietnam Dairy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Vietnam Dairy
The main advantage of trading using opposite Ford and Vietnam Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Vietnam Dairy 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 Vietnam Dairy will offset losses from the drop in Vietnam Dairy's long position.The idea behind Ford Motor and Vietnam Dairy Products 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.| Vietnam Dairy vs. FIT INVEST JSC | Vietnam Dairy vs. Damsan JSC | Vietnam Dairy vs. An Phat Plastic | Vietnam Dairy vs. APG Securities Joint |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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