Correlation Between Ford and WashTec AG
Can any of the company-specific risk be diversified away by investing in both Ford and WashTec AG 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 WashTec AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and WashTec AG, you can compare the effects of market volatilities on Ford and WashTec AG 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 WashTec AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and WashTec AG.
Diversification Opportunities for Ford and WashTec AG
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and WashTec is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and WashTec AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WashTec AG 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 WashTec AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WashTec AG has no effect on the direction of Ford i.e., Ford and WashTec AG go up and down completely randomly.
Pair Corralation between Ford and WashTec AG
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.5 times more return on investment than WashTec AG. However, Ford Motor is 2.01 times less risky than WashTec AG. It trades about -0.06 of its potential returns per unit of risk. WashTec AG is currently generating about -0.25 per unit of risk. If you would invest 990.00 in Ford Motor on January 6, 2025 and sell it today you would lose (32.00) from holding Ford Motor or give up 3.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. WashTec AG
Performance |
| Timeline |
| Ford Motor |
| WashTec AG |
Ford and WashTec AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and WashTec AG
The main advantage of trading using opposite Ford and WashTec AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, WashTec AG 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 WashTec AG will offset losses from the drop in WashTec AG's long position.The idea behind Ford Motor and WashTec AG 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.| WashTec AG vs. Ramsay Health Care | WashTec AG vs. Medical Facilities | WashTec AG vs. Jack Nathan Medical | WashTec AG vs. Fresenius SE Co |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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