Correlation Between NYSE Composite and Ford
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Ford 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 NYSE Composite and Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Ford Motor, you can compare the effects of market volatilities on NYSE Composite and Ford 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 NYSE Composite with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Ford.
Diversification Opportunities for NYSE Composite and Ford
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and Ford is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and NYSE Composite 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 NYSE Composite are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of NYSE Composite i.e., NYSE Composite and Ford go up and down completely randomly.
Pair Corralation between NYSE Composite and Ford
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.88 times less return on investment than Ford. But when comparing it to its historical volatility, NYSE Composite is 3.13 times less risky than Ford. It trades about 0.29 of its potential returns per unit of risk. Ford Motor is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,033 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 77.00 from holding Ford Motor or generate 7.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Ford Motor
Performance |
| Timeline |
NYSE Composite and Ford Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Ford Motor
Pair trading matchups for Ford
Pair Trading with NYSE Composite and Ford
The main advantage of trading using opposite NYSE Composite and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.| NYSE Composite vs. Nextplat Corp | NYSE Composite vs. Qualys Inc | NYSE Composite vs. Cadence Design Systems | NYSE Composite vs. Asure Software |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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