Correlation Between Ford and Federated Clover
Can any of the company-specific risk be diversified away by investing in both Ford and Federated Clover 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 Federated Clover into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Federated Clover Small, you can compare the effects of market volatilities on Ford and Federated Clover 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 Federated Clover. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Federated Clover.
Diversification Opportunities for Ford and Federated Clover
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ford and Federated is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Federated Clover Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Clover Small 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 Federated Clover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Clover Small has no effect on the direction of Ford i.e., Ford and Federated Clover go up and down completely randomly.
Pair Corralation between Ford and Federated Clover
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Federated Clover. In addition to that, Ford is 1.65 times more volatile than Federated Clover Small. It trades about -0.02 of its total potential returns per unit of risk. Federated Clover Small is currently generating about 0.02 per unit of volatility. If you would invest 2,079 in Federated Clover Small on November 3, 2024 and sell it today you would earn a total of 111.00 from holding Federated Clover Small or generate 5.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Ford Motor vs. Federated Clover Small
Performance |
| Timeline |
| Ford Motor |
| Federated Clover Small |
Ford and Federated Clover Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Federated Clover
The main advantage of trading using opposite Ford and Federated Clover positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Federated Clover 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 Federated Clover will offset losses from the drop in Federated Clover's long position.The idea behind Ford Motor and Federated Clover Small 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.| Federated Clover vs. Dws Global Macro | Federated Clover vs. Ab Global Bond | Federated Clover vs. Fm Investments Large | Federated Clover vs. Morningstar Global Income |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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