Correlation Between Ford and Empiric 2500

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Can any of the company-specific risk be diversified away by investing in both Ford and Empiric 2500 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 Empiric 2500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Empiric 2500 Fund, you can compare the effects of market volatilities on Ford and Empiric 2500 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 Empiric 2500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Empiric 2500.

Diversification Opportunities for Ford and Empiric 2500

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Ford and Empiric is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Empiric 2500 Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empiric 2500 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 Empiric 2500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empiric 2500 has no effect on the direction of Ford i.e., Ford and Empiric 2500 go up and down completely randomly.

Pair Corralation between Ford and Empiric 2500

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Empiric 2500. In addition to that, Ford is 1.36 times more volatile than Empiric 2500 Fund. It trades about -0.34 of its total potential returns per unit of risk. Empiric 2500 Fund is currently generating about -0.25 per unit of volatility. If you would invest  6,021  in Empiric 2500 Fund on September 27, 2024 and sell it today you would lose (312.00) from holding Empiric 2500 Fund or give up 5.18% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Ford Motor  vs.  Empiric 2500 Fund

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Empiric 2500 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Empiric 2500 Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Empiric 2500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ford and Empiric 2500 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Empiric 2500

The main advantage of trading using opposite Ford and Empiric 2500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Empiric 2500 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 Empiric 2500 will offset losses from the drop in Empiric 2500's long position.
The idea behind Ford Motor and Empiric 2500 Fund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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