Correlation Between Freedom Bank and Ford
Can any of the company-specific risk be diversified away by investing in both Freedom Bank and Ford 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 Freedom Bank and Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freedom Bank of and Ford Motor, you can compare the effects of market volatilities on Freedom Bank and Ford 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 Freedom Bank with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Bank and Ford.
Diversification Opportunities for Freedom Bank and Ford
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Freedom and Ford is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Bank of and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Freedom Bank 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 Freedom Bank of are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Freedom Bank i.e., Freedom Bank and Ford go up and down completely randomly.
Pair Corralation between Freedom Bank and Ford
Given the investment horizon of 90 days Freedom Bank of is expected to under-perform the Ford. But the otc stock apears to be less risky and, when comparing its historical volatility, Freedom Bank of is 2.2 times less risky than Ford. The otc stock trades about -0.08 of its potential returns per unit of risk. The Ford Motor is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 968.00 in Ford Motor on January 25, 2024 and sell it today you would earn a total of 327.00 from holding Ford Motor or generate 33.78% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Freedom Bank of vs. Ford Motor
Performance |
Timeline |
Freedom Bank |
Ford Motor |
Freedom Bank and Ford Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Freedom Bank and Ford
The main advantage of trading using opposite Freedom Bank and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Bank position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.Freedom Bank vs. Stevia Nutra Corp | Freedom Bank vs. Regent Ventures | Freedom Bank vs. Element Global | Freedom Bank vs. Affiliated Resources Corp |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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