Correlation Between Ford and Subaru Corp
Can any of the company-specific risk be diversified away by investing in both Ford and Subaru Corp 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 Subaru Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Subaru Corp ADR, you can compare the effects of market volatilities on Ford and Subaru Corp 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 Subaru Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Subaru Corp.
Diversification Opportunities for Ford and Subaru Corp
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Subaru is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Subaru Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Subaru Corp ADR 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 Subaru Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Subaru Corp ADR has no effect on the direction of Ford i.e., Ford and Subaru Corp go up and down completely randomly.
Pair Corralation between Ford and Subaru Corp
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Subaru Corp. In addition to that, Ford is 1.05 times more volatile than Subaru Corp ADR. It trades about -0.02 of its total potential returns per unit of risk. Subaru Corp ADR is currently generating about 0.01 per unit of volatility. If you would invest 1,103 in Subaru Corp ADR on March 4, 2024 and sell it today you would earn a total of 7.00 from holding Subaru Corp ADR or generate 0.63% 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. Subaru Corp ADR
Performance |
Timeline |
Ford Motor |
Subaru Corp ADR |
Ford and Subaru Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Subaru Corp
The main advantage of trading using opposite Ford and Subaru Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Subaru Corp 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 Subaru Corp will offset losses from the drop in Subaru Corp's long position.The idea behind Ford Motor and Subaru Corp ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Subaru Corp vs. Arhaus Inc | Subaru Corp vs. Floor Decor Holdings | Subaru Corp vs. Live Ventures | Subaru Corp vs. LL Flooring Holdings |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |