Correlation Between Ford and Braskem SA
Can any of the company-specific risk be diversified away by investing in both Ford and Braskem SA 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 Braskem SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Braskem SA, you can compare the effects of market volatilities on Ford and Braskem SA 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 Braskem SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Braskem SA.
Diversification Opportunities for Ford and Braskem SA
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and Braskem is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Braskem SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braskem SA 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 Braskem SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braskem SA has no effect on the direction of Ford i.e., Ford and Braskem SA go up and down completely randomly.
Pair Corralation between Ford and Braskem SA
Assuming the 90 days trading horizon Ford Motor is expected to generate 0.56 times more return on investment than Braskem SA. However, Ford Motor is 1.79 times less risky than Braskem SA. It trades about 0.03 of its potential returns per unit of risk. Braskem SA is currently generating about -0.14 per unit of risk. If you would invest 6,408 in Ford Motor on August 27, 2024 and sell it today you would earn a total of 60.00 from holding Ford Motor or generate 0.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Braskem SA
Performance |
| Timeline |
| Ford Motor |
| Braskem SA |
Ford and Braskem SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Braskem SA
The main advantage of trading using opposite Ford and Braskem SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Braskem SA 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 Braskem SA will offset losses from the drop in Braskem SA's long position.| Ford vs. Bread Financial Holdings | Ford vs. Deutsche Bank Aktiengesellschaft | Ford vs. Apartment Investment and | Ford vs. Delta Air Lines |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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