Correlation Between Mazda and Ferrari NV
Can any of the company-specific risk be diversified away by investing in both Mazda and Ferrari NV 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 Mazda and Ferrari NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mazda Motor and Ferrari NV, you can compare the effects of market volatilities on Mazda and Ferrari NV 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 Mazda with a short position of Ferrari NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mazda and Ferrari NV.
Diversification Opportunities for Mazda and Ferrari NV
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mazda and Ferrari is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Mazda Motor and Ferrari NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrari NV and Mazda 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 Mazda Motor are associated (or correlated) with Ferrari NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrari NV has no effect on the direction of Mazda i.e., Mazda and Ferrari NV go up and down completely randomly.
Pair Corralation between Mazda and Ferrari NV
Assuming the 90 days horizon Mazda Motor is expected to generate 1.53 times more return on investment than Ferrari NV. However, Mazda is 1.53 times more volatile than Ferrari NV. It trades about -0.09 of its potential returns per unit of risk. Ferrari NV is currently generating about -0.27 per unit of risk. If you would invest 694.00 in Mazda Motor on August 28, 2024 and sell it today you would lose (47.00) from holding Mazda Motor or give up 6.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mazda Motor vs. Ferrari NV
Performance |
| Timeline |
| Mazda Motor |
| Ferrari NV |
Mazda and Ferrari NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mazda and Ferrari NV
The main advantage of trading using opposite Mazda and Ferrari NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mazda position performs unexpectedly, Ferrari NV 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 Ferrari NV will offset losses from the drop in Ferrari NV's long position.The idea behind Mazda Motor and Ferrari NV 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.| Ferrari NV vs. Nio Class A | Ferrari NV vs. Lucid Group | Ferrari NV vs. Tesla Inc | Ferrari NV vs. Mullen Automotive |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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