Correlation Between Ford and US Global
Can any of the company-specific risk be diversified away by investing in both Ford and US Global 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 US Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and US Global Sea, you can compare the effects of market volatilities on Ford and US Global 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 US Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and US Global.
Diversification Opportunities for Ford and US Global
Excellent diversification
The 3 months correlation between Ford and SEA is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and US Global Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Sea 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 US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Sea has no effect on the direction of Ford i.e., Ford and US Global go up and down completely randomly.
Pair Corralation between Ford and US Global
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.9 times more return on investment than US Global. However, Ford is 2.9 times more volatile than US Global Sea. It trades about 0.2 of its potential returns per unit of risk. US Global Sea is currently generating about -0.03 per unit of risk. If you would invest 1,200 in Ford Motor on December 29, 2023 and sell it today you would earn a total of 106.00 from holding Ford Motor or generate 8.83% 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. US Global Sea
Performance |
Timeline |
Ford Motor |
US Global Sea |
Ford and US Global Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and US Global
The main advantage of trading using opposite Ford and US Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, US Global 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 US Global will offset losses from the drop in US Global's long position.Ford vs. Mobileye Global Class | Ford vs. Goodyear Tire Rubber | Ford vs. Quantumscape Corp | Ford vs. Visteon Corp |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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