Correlation Between Ford and Weiss Korea
Can any of the company-specific risk be diversified away by investing in both Ford and Weiss Korea 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 Weiss Korea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Weiss Korea Opportunity, you can compare the effects of market volatilities on Ford and Weiss Korea 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 Weiss Korea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Weiss Korea.
Diversification Opportunities for Ford and Weiss Korea
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Weiss is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Weiss Korea Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weiss Korea Opportunity 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 Weiss Korea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weiss Korea Opportunity has no effect on the direction of Ford i.e., Ford and Weiss Korea go up and down completely randomly.
Pair Corralation between Ford and Weiss Korea
Taking into account the 90-day investment horizon Ford is expected to generate 3.71 times less return on investment than Weiss Korea. But when comparing it to its historical volatility, Ford Motor is 2.17 times less risky than Weiss Korea. It trades about 0.14 of its potential returns per unit of risk. Weiss Korea Opportunity is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 13,550 in Weiss Korea Opportunity on November 3, 2024 and sell it today you would earn a total of 2,604 from holding Weiss Korea Opportunity or generate 19.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Ford Motor vs. Weiss Korea Opportunity
Performance |
| Timeline |
| Ford Motor |
| Weiss Korea Opportunity |
Ford and Weiss Korea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Weiss Korea
The main advantage of trading using opposite Ford and Weiss Korea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Weiss Korea 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 Weiss Korea will offset losses from the drop in Weiss Korea's long position.The idea behind Ford Motor and Weiss Korea Opportunity 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.| Weiss Korea vs. AcadeMedia AB | Weiss Korea vs. MediaZest plc | Weiss Korea vs. Ubisoft Entertainment | Weiss Korea vs. Alliance Data Systems |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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