Correlation Between Dupont De and Ford
Can any of the company-specific risk be diversified away by investing in both Dupont De 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 Dupont De and Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dupont De Nemours and Ford Motor, you can compare the effects of market volatilities on Dupont De 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 Dupont De with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Ford.
Diversification Opportunities for Dupont De and Ford
Poor diversification
The 3 months correlation between Dupont and Ford is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and Ford go up and down completely randomly.
Pair Corralation between Dupont De and Ford
Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the Ford. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 2.38 times less risky than Ford. The stock trades about -0.13 of its potential returns per unit of risk. The Ford Motor is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,290 in Ford Motor on January 25, 2024 and sell it today you would earn a total of 1.00 from holding Ford Motor or generate 0.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dupont De Nemours vs. Ford Motor
Performance |
| Timeline |
| Dupont De Nemours |
| Ford Motor |
Dupont De and Ford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dupont De and Ford
The main advantage of trading using opposite Dupont De and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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.The idea behind Dupont De Nemours and Ford Motor 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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