Correlation Between Ford and Associated British
Can any of the company-specific risk be diversified away by investing in both Ford and Associated British 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 Associated British into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Associated British Foods, you can compare the effects of market volatilities on Ford and Associated British 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 Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Associated British.
Diversification Opportunities for Ford and Associated British
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Associated is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods 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 Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Ford i.e., Ford and Associated British go up and down completely randomly.
Pair Corralation between Ford and Associated British
Taking into account the 90-day investment horizon Ford is expected to generate 4.84 times less return on investment than Associated British. In addition to that, Ford is 1.35 times more volatile than Associated British Foods. It trades about 0.01 of its total potential returns per unit of risk. Associated British Foods is currently generating about 0.06 per unit of volatility. If you would invest 1,921 in Associated British Foods on January 18, 2024 and sell it today you would earn a total of 1,049 from holding Associated British Foods or generate 54.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Associated British Foods
Performance |
| Timeline |
| Ford Motor |
| Associated British Foods |
Ford and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Associated British
The main advantage of trading using opposite Ford and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.| Ford vs. Hycroft Mining Holding | Ford vs. Exela Technologies | Ford vs. Aquagold International | Ford vs. Thrivent High Yield |
| Associated British vs. Artisan Consumer Goods | Associated British vs. The a2 Milk | Associated British vs. The A2 Milk |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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