Correlation Between Ford and Westamerica Bancorporation
Can any of the company-specific risk be diversified away by investing in both Ford and Westamerica Bancorporation 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 Westamerica Bancorporation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Westamerica Bancorporation, you can compare the effects of market volatilities on Ford and Westamerica Bancorporation 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 Westamerica Bancorporation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Westamerica Bancorporation.
Diversification Opportunities for Ford and Westamerica Bancorporation
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Westamerica is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Westamerica Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westamerica Bancorporation 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 Westamerica Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westamerica Bancorporation has no effect on the direction of Ford i.e., Ford and Westamerica Bancorporation go up and down completely randomly.
Pair Corralation between Ford and Westamerica Bancorporation
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.8 times more return on investment than Westamerica Bancorporation. However, Ford Motor is 1.25 times less risky than Westamerica Bancorporation. It trades about 0.19 of its potential returns per unit of risk. Westamerica Bancorporation is currently generating about 0.07 per unit of risk. If you would invest 974.00 in Ford Motor on October 20, 2024 and sell it today you would earn a total of 44.00 from holding Ford Motor or generate 4.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Westamerica Bancorp.
Performance |
| Timeline |
| Ford Motor |
| Westamerica Bancorporation |
Ford and Westamerica Bancorporation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Westamerica Bancorporation
The main advantage of trading using opposite Ford and Westamerica Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Westamerica Bancorporation 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 Westamerica Bancorporation will offset losses from the drop in Westamerica Bancorporation's long position.The idea behind Ford Motor and Westamerica Bancorporation 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.| Westamerica Bancorporation vs. Heritage Commerce Corp | Westamerica Bancorporation vs. Heritage Financial | Westamerica Bancorporation vs. Penns Woods Bancorp | Westamerica Bancorporation vs. 1st Source |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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