Correlation Between Ford and Elspec
Can any of the company-specific risk be diversified away by investing in both Ford and Elspec 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 Elspec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Elspec, you can compare the effects of market volatilities on Ford and Elspec 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 Elspec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Elspec.
Diversification Opportunities for Ford and Elspec
Weak diversification
The 3 months correlation between Ford and Elspec is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Elspec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elspec 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 Elspec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elspec has no effect on the direction of Ford i.e., Ford and Elspec go up and down completely randomly.
Pair Corralation between Ford and Elspec
Taking into account the 90-day investment horizon Ford is expected to generate 5.13 times less return on investment than Elspec. But when comparing it to its historical volatility, Ford Motor is 1.3 times less risky than Elspec. It trades about 0.01 of its potential returns per unit of risk. Elspec is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 35,400 in Elspec on December 30, 2023 and sell it today you would earn a total of 21,600 from holding Elspec or generate 61.02% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 78.95% |
Values | Daily Returns |
Ford Motor vs. Elspec
Performance |
Timeline |
Ford Motor |
Elspec |
Ford and Elspec Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Elspec
The main advantage of trading using opposite Ford and Elspec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Elspec 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 Elspec will offset losses from the drop in Elspec's long position.Ford vs. GreenPower Motor | Ford vs. Li AutoInc | Ford vs. Lotus Technology Warrants | Ford vs. Mullen Automotive |
Elspec vs. Orbit Technologies | Elspec vs. Migdal Insurance | Elspec vs. Hiron Trade Investments Industrial | Elspec vs. Retailors |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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