Correlation Between Ford and ResMed
Can any of the company-specific risk be diversified away by investing in both Ford and ResMed 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 ResMed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and ResMed Inc, you can compare the effects of market volatilities on Ford and ResMed 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 ResMed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and ResMed.
Diversification Opportunities for Ford and ResMed
Modest diversification
The 3 months correlation between Ford and ResMed is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc 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 ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of Ford i.e., Ford and ResMed go up and down completely randomly.
Pair Corralation between Ford and ResMed
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.12 times more return on investment than ResMed. However, Ford is 1.12 times more volatile than ResMed Inc. It trades about 0.09 of its potential returns per unit of risk. ResMed Inc is currently generating about -0.1 per unit of risk. 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 | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. ResMed Inc
Performance |
| Timeline |
| Ford Motor |
| ResMed Inc |
Ford and ResMed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and ResMed
The main advantage of trading using opposite Ford and ResMed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, ResMed 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 ResMed will offset losses from the drop in ResMed's long position.| Ford vs. Hycroft Mining Holding | Ford vs. Imperial Petroleum | Ford vs. Exela Technologies | Ford vs. Camber Energy |
| ResMed vs. Orthopediatrics Corp | ResMed vs. Electromed | ResMed vs. Varex Imaging Corp | ResMed vs. Sight Sciences |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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