Correlation Between Ford and Dicks Sporting
Can any of the company-specific risk be diversified away by investing in both Ford and Dicks Sporting 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 Dicks Sporting into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Dicks Sporting Goods, you can compare the effects of market volatilities on Ford and Dicks Sporting 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 Dicks Sporting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Dicks Sporting.
Diversification Opportunities for Ford and Dicks Sporting
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Dicks is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dicks Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dicks Sporting Goods 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 Dicks Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dicks Sporting Goods has no effect on the direction of Ford i.e., Ford and Dicks Sporting go up and down completely randomly.
Pair Corralation between Ford and Dicks Sporting
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Dicks Sporting. In addition to that, Ford is 1.7 times more volatile than Dicks Sporting Goods. It trades about -0.16 of its total potential returns per unit of risk. Dicks Sporting Goods is currently generating about -0.19 per unit of volatility. If you would invest 21,119 in Dicks Sporting Goods on February 3, 2024 and sell it today you would lose (1,200) from holding Dicks Sporting Goods or give up 5.68% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Ford Motor vs. Dicks Sporting Goods
Performance |
Timeline |
Ford Motor |
Dicks Sporting Goods |
Ford and Dicks Sporting Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Dicks Sporting
The main advantage of trading using opposite Ford and Dicks Sporting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Dicks Sporting 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 Dicks Sporting will offset losses from the drop in Dicks Sporting's long position.Ford vs. Hycroft Mining Holding | Ford vs. Imperial Petroleum | Ford vs. Exela Technologies | Ford vs. Camber Energy |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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