Correlation Between Ford and Yamaha
Can any of the company-specific risk be diversified away by investing in both Ford and Yamaha 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 Yamaha into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Yamaha, you can compare the effects of market volatilities on Ford and Yamaha 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 Yamaha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Yamaha.
Diversification Opportunities for Ford and Yamaha
Very good diversification
The 3 months correlation between Ford and Yamaha is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Yamaha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha 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 Yamaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha has no effect on the direction of Ford i.e., Ford and Yamaha go up and down completely randomly.
Pair Corralation between Ford and Yamaha
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.75 times more return on investment than Yamaha. However, Ford Motor is 1.34 times less risky than Yamaha. It trades about -0.01 of its potential returns per unit of risk. Yamaha is currently generating about -0.06 per unit of risk. If you would invest 1,066 in Ford Motor on September 15, 2024 and sell it today you would lose (27.00) from holding Ford Motor or give up 2.53% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.46% |
Values | Daily Returns |
Ford Motor vs. Yamaha
Performance |
Timeline |
Ford Motor |
Yamaha |
Ford and Yamaha Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Yamaha
The main advantage of trading using opposite Ford and Yamaha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Yamaha 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 Yamaha will offset losses from the drop in Yamaha's long position.The idea behind Ford Motor and Yamaha 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.Yamaha vs. Singapore Airlines Limited | ||
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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