Correlation Between Ford and Western Bulk
Can any of the company-specific risk be diversified away by investing in both Ford and Western Bulk 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 Western Bulk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Western Bulk Chartering, you can compare the effects of market volatilities on Ford and Western Bulk 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 Western Bulk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Western Bulk.
Diversification Opportunities for Ford and Western Bulk
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Western is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Western Bulk Chartering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Bulk Chartering 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 Western Bulk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Bulk Chartering has no effect on the direction of Ford i.e., Ford and Western Bulk go up and down completely randomly.
Pair Corralation between Ford and Western Bulk
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.01 times more return on investment than Western Bulk. However, Ford is 1.01 times more volatile than Western Bulk Chartering. It trades about 0.03 of its potential returns per unit of risk. Western Bulk Chartering is currently generating about -0.07 per unit of risk. If you would invest 989.00 in Ford Motor on August 27, 2024 and sell it today you would earn a total of 129.00 from holding Ford Motor or generate 13.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Western Bulk Chartering
Performance |
| Timeline |
| Ford Motor |
| Western Bulk Chartering |
Ford and Western Bulk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Western Bulk
The main advantage of trading using opposite Ford and Western Bulk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Western Bulk 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 Western Bulk will offset losses from the drop in Western Bulk's long position.The idea behind Ford Motor and Western Bulk Chartering 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.| Western Bulk vs. SITC International Holdings | Western Bulk vs. Pacific Basin Shipping | Western Bulk vs. SITC International Holdings | Western Bulk vs. Mitsui OSK Lines |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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