Correlation Between Ford and Westwood Quality
Can any of the company-specific risk be diversified away by investing in both Ford and Westwood Quality 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 Westwood Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Westwood Quality Smallcap, you can compare the effects of market volatilities on Ford and Westwood Quality 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 Westwood Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Westwood Quality.
Diversification Opportunities for Ford and Westwood Quality
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Westwood is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Westwood Quality Smallcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Quality Smallcap 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 Westwood Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Quality Smallcap has no effect on the direction of Ford i.e., Ford and Westwood Quality go up and down completely randomly.
Pair Corralation between Ford and Westwood Quality
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Westwood Quality. In addition to that, Ford is 1.93 times more volatile than Westwood Quality Smallcap. It trades about 0.0 of its total potential returns per unit of risk. Westwood Quality Smallcap is currently generating about 0.1 per unit of volatility. If you would invest 2,020 in Westwood Quality Smallcap on September 2, 2024 and sell it today you would earn a total of 324.00 from holding Westwood Quality Smallcap or generate 16.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Westwood Quality Smallcap
Performance |
| Timeline |
| Ford Motor |
| Westwood Quality Smallcap |
Ford and Westwood Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Westwood Quality
The main advantage of trading using opposite Ford and Westwood Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Westwood Quality 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 Westwood Quality will offset losses from the drop in Westwood Quality's long position.The idea behind Ford Motor and Westwood Quality Smallcap 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.| Westwood Quality vs. Dws Government Money | Westwood Quality vs. Chestnut Street Exchange | Westwood Quality vs. Prudential Government Money | Westwood Quality vs. Aig Government Money |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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