Correlation Between Ford and John Wiley
Can any of the company-specific risk be diversified away by investing in both Ford and John Wiley 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 John Wiley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and John Wiley Sons, you can compare the effects of market volatilities on Ford and John Wiley 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 John Wiley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and John Wiley.
Diversification Opportunities for Ford and John Wiley
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ford and John is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and John Wiley Sons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Wiley Sons 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 John Wiley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Wiley Sons has no effect on the direction of Ford i.e., Ford and John Wiley go up and down completely randomly.
Pair Corralation between Ford and John Wiley
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the John Wiley. In addition to that, Ford is 1.45 times more volatile than John Wiley Sons. It trades about -0.09 of its total potential returns per unit of risk. John Wiley Sons is currently generating about -0.09 per unit of volatility. If you would invest 4,279 in John Wiley Sons on November 9, 2024 and sell it today you would lose (138.00) from holding John Wiley Sons or give up 3.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. John Wiley Sons
Performance |
| Timeline |
| Ford Motor |
| John Wiley Sons |
Ford and John Wiley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and John Wiley
The main advantage of trading using opposite Ford and John Wiley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, John Wiley 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 John Wiley will offset losses from the drop in John Wiley's long position.The idea behind Ford Motor and John Wiley Sons 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.| John Wiley vs. Scholastic | John Wiley vs. Pearson PLC ADR | John Wiley vs. New York Times | John Wiley vs. Lee Enterprises Incorporated |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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