Correlation Between Ford and Alexander Marine
Can any of the company-specific risk be diversified away by investing in both Ford and Alexander Marine 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 Alexander Marine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Alexander Marine Co, you can compare the effects of market volatilities on Ford and Alexander Marine 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 Alexander Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Alexander Marine.
Diversification Opportunities for Ford and Alexander Marine
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Alexander is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Alexander Marine Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alexander Marine 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 Alexander Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alexander Marine has no effect on the direction of Ford i.e., Ford and Alexander Marine go up and down completely randomly.
Pair Corralation between Ford and Alexander Marine
Taking into account the 90-day investment horizon Ford is expected to generate 2.89 times less return on investment than Alexander Marine. In addition to that, Ford is 1.15 times more volatile than Alexander Marine Co. It trades about 0.03 of its total potential returns per unit of risk. Alexander Marine Co is currently generating about 0.09 per unit of volatility. If you would invest 18,700 in Alexander Marine Co on December 5, 2024 and sell it today you would earn a total of 600.00 from holding Alexander Marine Co or generate 3.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Ford Motor vs. Alexander Marine Co
Performance |
Timeline |
Ford Motor |
Alexander Marine |
Ford and Alexander Marine Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Alexander Marine
The main advantage of trading using opposite Ford and Alexander Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Alexander Marine 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 Alexander Marine will offset losses from the drop in Alexander Marine's long position.The idea behind Ford Motor and Alexander Marine 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.Alexander Marine vs. Chung Hsin Electric Machinery | Alexander Marine vs. Andes Technology Corp | Alexander Marine vs. Asia Vital Components | Alexander Marine vs. Fulgent Sun International |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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