Correlation Between Ford and Galapagos
Can any of the company-specific risk be diversified away by investing in both Ford and Galapagos 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 Galapagos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Galapagos NV ADR, you can compare the effects of market volatilities on Ford and Galapagos 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 Galapagos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Galapagos.
Diversification Opportunities for Ford and Galapagos
Excellent diversification
The 3 months correlation between Ford and Galapagos is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Galapagos NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galapagos NV ADR 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 Galapagos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galapagos NV ADR has no effect on the direction of Ford i.e., Ford and Galapagos go up and down completely randomly.
Pair Corralation between Ford and Galapagos
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.25 times more return on investment than Galapagos. However, Ford is 2.25 times more volatile than Galapagos NV ADR. It trades about -0.14 of its potential returns per unit of risk. Galapagos NV ADR is currently generating about -0.76 per unit of risk. If you would invest 1,290 in Ford Motor on January 20, 2024 and sell it today you would lose (84.00) from holding Ford Motor or give up 6.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Galapagos NV ADR
Performance |
| Timeline |
| Ford Motor |
| Galapagos NV ADR |
Ford and Galapagos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Galapagos
The main advantage of trading using opposite Ford and Galapagos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Galapagos 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 Galapagos will offset losses from the drop in Galapagos' long position.The idea behind Ford Motor and Galapagos NV ADR 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.| Galapagos vs. CytomX Therapeutics | Galapagos vs. Spero Therapeutics | Galapagos vs. Instil Bio | Galapagos vs. NextCure |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Stocks Directory Find actively traded stocks across global markets | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |