Correlation Between Ford and Zurn Elkay
Can any of the company-specific risk be diversified away by investing in both Ford and Zurn Elkay 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 Zurn Elkay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Zurn Elkay Water, you can compare the effects of market volatilities on Ford and Zurn Elkay 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 Zurn Elkay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Zurn Elkay.
Diversification Opportunities for Ford and Zurn Elkay
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Zurn is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Zurn Elkay Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurn Elkay Water 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 Zurn Elkay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zurn Elkay Water has no effect on the direction of Ford i.e., Ford and Zurn Elkay go up and down completely randomly.
Pair Corralation between Ford and Zurn Elkay
Taking into account the 90-day investment horizon Ford is expected to generate 1.56 times less return on investment than Zurn Elkay. In addition to that, Ford is 1.68 times more volatile than Zurn Elkay Water. It trades about 0.1 of its total potential returns per unit of risk. Zurn Elkay Water is currently generating about 0.26 per unit of volatility. If you would invest 3,462 in Zurn Elkay Water on August 26, 2024 and sell it today you would earn a total of 531.00 from holding Zurn Elkay Water or generate 15.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Zurn Elkay Water
Performance |
| Timeline |
| Ford Motor |
| Zurn Elkay Water |
Ford and Zurn Elkay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Zurn Elkay
The main advantage of trading using opposite Ford and Zurn Elkay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Zurn Elkay 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 Zurn Elkay will offset losses from the drop in Zurn Elkay's long position.The idea behind Ford Motor and Zurn Elkay Water 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.| Zurn Elkay vs. Energy Recovery | Zurn Elkay vs. CECO Environmental Corp | Zurn Elkay vs. 374Water Common Stock | Zurn Elkay vs. Federal Signal |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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