Correlation Between Ford and Innovator Equity
Can any of the company-specific risk be diversified away by investing in both Ford and Innovator Equity 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 Innovator Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Innovator Equity Defined, you can compare the effects of market volatilities on Ford and Innovator Equity 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 Innovator Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Innovator Equity.
Diversification Opportunities for Ford and Innovator Equity
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Innovator is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Innovator Equity Defined in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Defined 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 Innovator Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Defined has no effect on the direction of Ford i.e., Ford and Innovator Equity go up and down completely randomly.
Pair Corralation between Ford and Innovator Equity
Taking into account the 90-day investment horizon Ford Motor is expected to generate 12.12 times more return on investment than Innovator Equity. However, Ford is 12.12 times more volatile than Innovator Equity Defined. It trades about 0.25 of its potential returns per unit of risk. Innovator Equity Defined is currently generating about 0.35 per unit of risk. If you would invest 1,008 in Ford Motor on September 2, 2024 and sell it today you would earn a total of 105.00 from holding Ford Motor or generate 10.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Innovator Equity Defined
Performance |
| Timeline |
| Ford Motor |
| Innovator Equity Defined |
Ford and Innovator Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Innovator Equity
The main advantage of trading using opposite Ford and Innovator Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Innovator Equity 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 Innovator Equity will offset losses from the drop in Innovator Equity's long position.The idea behind Ford Motor and Innovator Equity Defined 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.| Innovator Equity vs. FT Vest Equity | Innovator Equity vs. Northern Lights | Innovator Equity vs. Dimensional International High | Innovator Equity vs. Matthews China Discovery |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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