Correlation Between Ford and Prosperity Dielectrics

Can any of the company-specific risk be diversified away by investing in both Ford and Prosperity Dielectrics 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 Prosperity Dielectrics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and Prosperity Dielectrics Co, you can compare the effects of market volatilities on Ford and Prosperity Dielectrics 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 Prosperity Dielectrics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Prosperity Dielectrics.

Diversification Opportunities for Ford and Prosperity Dielectrics

0.16

Correlation Coefficient

Ford  Prosperity Dielectrics

Average diversification

The 3 months correlation between Ford and Prosperity is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Prosperity Dielectrics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosperity Dielectrics 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 Prosperity Dielectrics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosperity Dielectrics has no effect on the direction of Ford i.e., Ford and Prosperity Dielectrics go up and down completely randomly.

Pair Corralation between Ford and Prosperity Dielectrics

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Prosperity Dielectrics. In addition to that, Ford is 1.08 times more volatile than Prosperity Dielectrics Co. It trades about -0.01 of its total potential returns per unit of risk. Prosperity Dielectrics Co is currently generating about 0.03 per unit of volatility. If you would invest  3,573  in Prosperity Dielectrics Co on October 3, 2024 and sell it today you would earn a total of  712.00  from holding Prosperity Dielectrics Co or generate 19.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.52%
Values	Daily Returns

Ford Motor  vs.  Prosperity Dielectrics Co

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Prosperity Dielectrics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosperity Dielectrics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Ford and Prosperity Dielectrics

The main advantage of trading using opposite Ford and Prosperity Dielectrics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Prosperity Dielectrics 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 Prosperity Dielectrics will offset losses from the drop in Prosperity Dielectrics' long position.

The idea behind Ford Motor and Prosperity Dielectrics Co 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.