Correlation Between Ford and Baldwin Insurance
Can any of the company-specific risk be diversified away by investing in both Ford and Baldwin Insurance 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 Baldwin Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and The Baldwin Insurance, you can compare the effects of market volatilities on Ford and Baldwin Insurance 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 Baldwin Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Baldwin Insurance.
Diversification Opportunities for Ford and Baldwin Insurance
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Baldwin is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and The Baldwin Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baldwin Insurance 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 Baldwin Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baldwin Insurance has no effect on the direction of Ford i.e., Ford and Baldwin Insurance go up and down completely randomly.
Pair Corralation between Ford and Baldwin Insurance
Taking into account the 90-day investment horizon Ford is expected to generate 24.98 times less return on investment than Baldwin Insurance. But when comparing it to its historical volatility, Ford Motor is 1.17 times less risky than Baldwin Insurance. It trades about 0.0 of its potential returns per unit of risk. The Baldwin Insurance is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,330 in The Baldwin Insurance on December 2, 2024 and sell it today you would earn a total of 1,784 from holding The Baldwin Insurance or generate 76.57% 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. The Baldwin Insurance
Performance |
Timeline |
Ford Motor |
Baldwin Insurance |
Ford and Baldwin Insurance Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Baldwin Insurance
The main advantage of trading using opposite Ford and Baldwin Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Baldwin Insurance 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 Baldwin Insurance will offset losses from the drop in Baldwin Insurance's long position.The idea behind Ford Motor and The Baldwin Insurance 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.Baldwin Insurance vs. Zhihu Inc ADR | Baldwin Insurance vs. Skillful Craftsman Education | Baldwin Insurance vs. Weibo Corp | Baldwin Insurance vs. Universal Technical Institute |
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.
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