Correlation Between Ford and Group 6
Can any of the company-specific risk be diversified away by investing in both Ford and Group 6 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 Group 6 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Group 6 Metals, you can compare the effects of market volatilities on Ford and Group 6 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 Group 6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Group 6.
Diversification Opportunities for Ford and Group 6
Average diversification
The 3 months correlation between Ford and Group is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Group 6 Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group 6 Metals 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 Group 6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group 6 Metals has no effect on the direction of Ford i.e., Ford and Group 6 go up and down completely randomly.
Pair Corralation between Ford and Group 6
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.41 times more return on investment than Group 6. However, Ford Motor is 2.43 times less risky than Group 6. It trades about 0.02 of its potential returns per unit of risk. Group 6 Metals is currently generating about -0.04 per unit of risk. If you would invest 996.00 in Ford Motor on September 11, 2024 and sell it today you would earn a total of 64.00 from holding Ford Motor or generate 6.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 99.2% |
Values | Daily Returns |
Ford Motor vs. Group 6 Metals
Performance |
Timeline |
Ford Motor |
Group 6 Metals |
Ford and Group 6 Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Group 6
The main advantage of trading using opposite Ford and Group 6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Group 6 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 Group 6 will offset losses from the drop in Group 6's long position.The idea behind Ford Motor and Group 6 Metals 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.Group 6 vs. Farm Pride Foods | Group 6 vs. Australian United Investment | Group 6 vs. Collins Foods | Group 6 vs. Beston Global Food |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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