Correlation Between Baxter International and Ford
Can any of the company-specific risk be diversified away by investing in both Baxter International 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 Baxter International and Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baxter International and Ford Motor, you can compare the effects of market volatilities on Baxter International 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 Baxter International with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baxter International and Ford.
Diversification Opportunities for Baxter International and Ford
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baxter and Ford is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Baxter International 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 Baxter International 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 Baxter International i.e., Baxter International and Ford go up and down completely randomly.
Pair Corralation between Baxter International and Ford
Considering the 90-day investment horizon Baxter International is expected to under-perform the Ford. But the stock apears to be less risky and, when comparing its historical volatility, Baxter International is 1.27 times less risky than Ford. The stock trades about -0.04 of its potential returns per unit of risk. The Ford Motor is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,228 in Ford Motor on January 26, 2024 and sell it today you would earn a total of 67.00 from holding Ford Motor or generate 5.46% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Baxter International vs. Ford Motor
Performance |
Timeline |
Baxter International |
Ford Motor |
Baxter International and Ford Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Baxter International and Ford
The main advantage of trading using opposite Baxter International and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baxter International 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.Baxter International vs. Embecta Corp | Baxter International vs. West Pharmaceutical Services | Baxter International vs. ResMed Inc | Baxter International vs. The Cooper Companies |
Ford vs. Hycroft Mining Holding | Ford vs. Imperial Petroleum | Ford vs. Exela Technologies | Ford vs. Camber Energy |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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