Correlation Between Ford and Dantax
Can any of the company-specific risk be diversified away by investing in both Ford and Dantax 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 Dantax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Dantax, you can compare the effects of market volatilities on Ford and Dantax 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 Dantax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Dantax.
Diversification Opportunities for Ford and Dantax
Poor diversification
The 3 months correlation between Ford and Dantax is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dantax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dantax 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 Dantax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dantax has no effect on the direction of Ford i.e., Ford and Dantax go up and down completely randomly.
Pair Corralation between Ford and Dantax
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.16 times more return on investment than Dantax. However, Ford is 1.16 times more volatile than Dantax. It trades about 0.01 of its potential returns per unit of risk. Dantax is currently generating about -0.01 per unit of risk. If you would invest 1,292 in Ford Motor on December 29, 2023 and sell it today you would earn a total of 36.00 from holding Ford Motor or generate 2.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.8% |
Values | Daily Returns |
Ford Motor vs. Dantax
Performance |
Timeline |
Ford Motor |
Dantax |
Ford and Dantax Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Dantax
The main advantage of trading using opposite Ford and Dantax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Dantax 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 Dantax will offset losses from the drop in Dantax's long position.Ford vs. GreenPower Motor | Ford vs. Li AutoInc | Ford vs. Lotus Technology Warrants | Ford vs. Mullen Automotive |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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