Correlation Between Ford and XOMA Corp
Can any of the company-specific risk be diversified away by investing in both Ford and XOMA Corp 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 XOMA Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and XOMA Corp, you can compare the effects of market volatilities on Ford and XOMA Corp 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 XOMA Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and XOMA Corp.
Diversification Opportunities for Ford and XOMA Corp
Significant diversification
The 3 months correlation between Ford and XOMA is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and XOMA Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XOMA Corp 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 XOMA Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XOMA Corp has no effect on the direction of Ford i.e., Ford and XOMA Corp go up and down completely randomly.
Pair Corralation between Ford and XOMA Corp
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.78 times more return on investment than XOMA Corp. However, Ford is 2.78 times more volatile than XOMA Corp. It trades about 0.06 of its potential returns per unit of risk. XOMA Corp is currently generating about 0.05 per unit of risk. If you would invest 1,064 in Ford Motor on August 28, 2024 and sell it today you would earn a total of 46.00 from holding Ford Motor or generate 4.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. XOMA Corp
Performance |
| Timeline |
| Ford Motor |
| XOMA Corp |
Ford and XOMA Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and XOMA Corp
The main advantage of trading using opposite Ford and XOMA Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, XOMA Corp 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 XOMA Corp will offset losses from the drop in XOMA Corp's long position.The idea behind Ford Motor and XOMA Corp 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.| XOMA Corp vs. Harrow Health 8625 | XOMA Corp vs. SiriusPoint | XOMA Corp vs. New York Mortgage | XOMA Corp vs. Sachem Capital Corp |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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