Correlation Between Ford and Lerøy Seafood
Can any of the company-specific risk be diversified away by investing in both Ford and Lerøy Seafood 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 Lerøy Seafood into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Lery Seafood Group, you can compare the effects of market volatilities on Ford and Lerøy Seafood 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 Lerøy Seafood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Lerøy Seafood.
Diversification Opportunities for Ford and Lerøy Seafood
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Lerøy is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Lery Seafood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lery Seafood Group 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 Lerøy Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lery Seafood Group has no effect on the direction of Ford i.e., Ford and Lerøy Seafood go up and down completely randomly.
Pair Corralation between Ford and Lerøy Seafood
Taking into account the 90-day investment horizon Ford is expected to generate 22.88 times less return on investment than Lerøy Seafood. But when comparing it to its historical volatility, Ford Motor is 3.02 times less risky than Lerøy Seafood. It trades about 0.01 of its potential returns per unit of risk. Lery Seafood Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 163.00 in Lery Seafood Group on September 4, 2024 and sell it today you would earn a total of 275.00 from holding Lery Seafood Group or generate 168.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.64% |
| Values | Daily Returns |
Ford Motor vs. Lery Seafood Group
Performance |
| Timeline |
| Ford Motor |
| Lery Seafood Group |
Ford and Lerøy Seafood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Lerøy Seafood
The main advantage of trading using opposite Ford and Lerøy Seafood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Lerøy Seafood 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 Lerøy Seafood will offset losses from the drop in Lerøy Seafood's long position.The idea behind Ford Motor and Lery Seafood Group 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.| Lerøy Seafood vs. Nestl SA | Lerøy Seafood vs. Kraft Heinz Co | Lerøy Seafood vs. General Mills | Lerøy Seafood vs. Kellogg Company |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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