Correlation Between Ford and Madison Pacific
Can any of the company-specific risk be diversified away by investing in both Ford and Madison Pacific 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 Madison Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Madison Pacific Properties, you can compare the effects of market volatilities on Ford and Madison Pacific 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 Madison Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Madison Pacific.
Diversification Opportunities for Ford and Madison Pacific
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Madison is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Madison Pacific Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Pacific Prop 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 Madison Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Pacific Prop has no effect on the direction of Ford i.e., Ford and Madison Pacific go up and down completely randomly.
Pair Corralation between Ford and Madison Pacific
Taking into account the 90-day investment horizon Ford is expected to generate 2.76 times less return on investment than Madison Pacific. But when comparing it to its historical volatility, Ford Motor is 1.31 times less risky than Madison Pacific. It trades about 0.03 of its potential returns per unit of risk. Madison Pacific Properties is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 410.00 in Madison Pacific Properties on September 6, 2024 and sell it today you would earn a total of 40.00 from holding Madison Pacific Properties or generate 9.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Ford Motor vs. Madison Pacific Properties
Performance |
Timeline |
Ford Motor |
Madison Pacific Prop |
Ford and Madison Pacific Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Madison Pacific
The main advantage of trading using opposite Ford and Madison Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Madison Pacific 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 Madison Pacific will offset losses from the drop in Madison Pacific's long position.The idea behind Ford Motor and Madison Pacific Properties 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.Madison Pacific vs. Cogeco Communications | Madison Pacific vs. Gamehost | Madison Pacific vs. Quipt Home Medical | Madison Pacific vs. Vizsla Silver Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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