Correlation Between Ford and UGAZ
Can any of the company-specific risk be diversified away by investing in both Ford and UGAZ 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 UGAZ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and UGAZ, you can compare the effects of market volatilities on Ford and UGAZ 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 UGAZ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and UGAZ.
Diversification Opportunities for Ford and UGAZ
Pay attention - limited upside
The 3 months correlation between Ford and UGAZ is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and UGAZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UGAZ 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 UGAZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UGAZ has no effect on the direction of Ford i.e., Ford and UGAZ go up and down completely randomly.
Pair Corralation between Ford and UGAZ
If you would invest 1,244 in Ford Motor on January 26, 2024 and sell it today you would earn a total of 51.00 from holding Ford Motor or generate 4.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Ford Motor vs. UGAZ
Performance |
| Timeline |
| Ford Motor |
| UGAZ |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and UGAZ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and UGAZ
The main advantage of trading using opposite Ford and UGAZ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, UGAZ 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 UGAZ will offset losses from the drop in UGAZ's long position.The idea behind Ford Motor and UGAZ 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.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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