Correlation Between Ferrari NV and ATVRockN
Can any of the company-specific risk be diversified away by investing in both Ferrari NV and ATVRockN 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 Ferrari NV and ATVRockN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferrari NV and ATVRockN, you can compare the effects of market volatilities on Ferrari NV and ATVRockN 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 Ferrari NV with a short position of ATVRockN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrari NV and ATVRockN.
Diversification Opportunities for Ferrari NV and ATVRockN
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ferrari and ATVRockN is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ferrari NV and ATVRockN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATVRockN and Ferrari NV 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 Ferrari NV are associated (or correlated) with ATVRockN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATVRockN has no effect on the direction of Ferrari NV i.e., Ferrari NV and ATVRockN go up and down completely randomly.
Pair Corralation between Ferrari NV and ATVRockN
Given the investment horizon of 90 days Ferrari NV is expected to generate 0.35 times more return on investment than ATVRockN. However, Ferrari NV is 2.89 times less risky than ATVRockN. It trades about -0.06 of its potential returns per unit of risk. ATVRockN is currently generating about -0.16 per unit of risk. If you would invest 44,923 in Ferrari NV on January 13, 2025 and sell it today you would lose (2,065) from holding Ferrari NV or give up 4.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ferrari NV vs. ATVRockN
Performance |
| Timeline |
| Ferrari NV |
| ATVRockN |
Ferrari NV and ATVRockN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferrari NV and ATVRockN
The main advantage of trading using opposite Ferrari NV and ATVRockN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferrari NV position performs unexpectedly, ATVRockN 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 ATVRockN will offset losses from the drop in ATVRockN's long position.| Ferrari NV vs. Volkswagen AG Pref | Ferrari NV vs. Volkswagen AG 110 | Ferrari NV vs. Porsche Automobil Holding | Ferrari NV vs. Toyota Motor |
| ATVRockN vs. Brewbilt Brewing Co | ATVRockN vs. American Pwr Group | ATVRockN vs. Aumann AG | ATVRockN vs. Amaero International |
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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