Correlation Between Ford and Wcm China
Can any of the company-specific risk be diversified away by investing in both Ford and Wcm China 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 Wcm China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Wcm China Quality, you can compare the effects of market volatilities on Ford and Wcm China 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 Wcm China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Wcm China.
Diversification Opportunities for Ford and Wcm China
Good diversification
The 3 months correlation between Ford and Wcm is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Wcm China Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wcm China Quality 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 Wcm China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wcm China Quality has no effect on the direction of Ford i.e., Ford and Wcm China go up and down completely randomly.
Pair Corralation between Ford and Wcm China
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.32 times more return on investment than Wcm China. However, Ford is 1.32 times more volatile than Wcm China Quality. It trades about 0.25 of its potential returns per unit of risk. Wcm China Quality is currently generating about -0.12 per unit of risk. If you would invest 1,008 in Ford Motor on September 2, 2024 and sell it today you would earn a total of 105.00 from holding Ford Motor or generate 10.42% 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. Wcm China Quality
Performance |
| Timeline |
| Ford Motor |
| Wcm China Quality |
Ford and Wcm China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Wcm China
The main advantage of trading using opposite Ford and Wcm China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Wcm China 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 Wcm China will offset losses from the drop in Wcm China's long position.The idea behind Ford Motor and Wcm China Quality 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.| Wcm China vs. Small Midcap Dividend Income | Wcm China vs. Rational Defensive Growth | Wcm China vs. Growth Opportunities Fund | Wcm China vs. Champlain Mid Cap |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |