Correlation Between Ford and New Oriental
Can any of the company-specific risk be diversified away by investing in both Ford and New Oriental 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 New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and New Oriental Education, you can compare the effects of market volatilities on Ford and New Oriental 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 New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and New Oriental.
Diversification Opportunities for Ford and New Oriental
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and New is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education 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 New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of Ford i.e., Ford and New Oriental go up and down completely randomly.
Pair Corralation between Ford and New Oriental
Taking into account the 90-day investment horizon Ford is expected to generate 11.08 times less return on investment than New Oriental. But when comparing it to its historical volatility, Ford Motor is 1.75 times less risky than New Oriental. It trades about 0.02 of its potential returns per unit of risk. New Oriental Education is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,220 in New Oriental Education on January 26, 2024 and sell it today you would earn a total of 6,488 from holding New Oriental Education or generate 531.8% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Ford Motor vs. New Oriental Education
Performance |
Timeline |
Ford Motor |
New Oriental Education |
Ford and New Oriental Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and New Oriental
The main advantage of trading using opposite Ford and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, New Oriental 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 New Oriental will offset losses from the drop in New Oriental'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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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