Correlation Between Ford and Federated Intermediate
Can any of the company-specific risk be diversified away by investing in both Ford and Federated Intermediate 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 Federated Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Federated Intermediate Municipal, you can compare the effects of market volatilities on Ford and Federated Intermediate 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 Federated Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Federated Intermediate.
Diversification Opportunities for Ford and Federated Intermediate
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Federated is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Federated Intermediate Municip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Intermediate 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 Federated Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Intermediate has no effect on the direction of Ford i.e., Ford and Federated Intermediate go up and down completely randomly.
Pair Corralation between Ford and Federated Intermediate
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Federated Intermediate. In addition to that, Ford is 8.62 times more volatile than Federated Intermediate Municipal. It trades about -0.23 of its total potential returns per unit of risk. Federated Intermediate Municipal is currently generating about -0.16 per unit of volatility. If you would invest 972.00 in Federated Intermediate Municipal on September 22, 2024 and sell it today you would lose (7.00) from holding Federated Intermediate Municipal or give up 0.72% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.45% |
Values | Daily Returns |
Ford Motor vs. Federated Intermediate Municip
Performance |
Timeline |
Ford Motor |
Federated Intermediate |
Ford and Federated Intermediate Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Federated Intermediate
The main advantage of trading using opposite Ford and Federated Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Federated Intermediate 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 Federated Intermediate will offset losses from the drop in Federated Intermediate's long position.The idea behind Ford Motor and Federated Intermediate Municipal 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.Federated Intermediate vs. Federated Emerging Market | Federated Intermediate vs. Federated Mdt All | Federated Intermediate vs. Federated Mdt Balanced | Federated Intermediate vs. Federated Global Allocation |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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