Correlation Between Ford and XBiotech
Can any of the company-specific risk be diversified away by investing in both Ford and XBiotech 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 XBiotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and XBiotech, you can compare the effects of market volatilities on Ford and XBiotech 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 XBiotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and XBiotech.
Diversification Opportunities for Ford and XBiotech
Poor diversification
The 3 months correlation between Ford and XBiotech is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and XBiotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XBiotech 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 XBiotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XBiotech has no effect on the direction of Ford i.e., Ford and XBiotech go up and down completely randomly.
Pair Corralation between Ford and XBiotech
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.55 times more return on investment than XBiotech. However, Ford Motor is 1.83 times less risky than XBiotech. It trades about 0.16 of its potential returns per unit of risk. XBiotech is currently generating about -0.22 per unit of risk. If you would invest 965.00 in Ford Motor on November 2, 2024 and sell it today you would earn a total of 51.00 from holding Ford Motor or generate 5.28% 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. XBiotech
Performance |
| Timeline |
| Ford Motor |
| XBiotech |
Ford and XBiotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and XBiotech
The main advantage of trading using opposite Ford and XBiotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, XBiotech 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 XBiotech will offset losses from the drop in XBiotech's long position.The idea behind Ford Motor and XBiotech 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.| XBiotech vs. Generation Bio Co | XBiotech vs. Kronos Bio | XBiotech vs. Erasca Inc | XBiotech vs. C4 Therapeutics |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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