Correlation Between Ford and Esquire Financial
Can any of the company-specific risk be diversified away by investing in both Ford and Esquire Financial 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 Esquire Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Esquire Financial Holdings, you can compare the effects of market volatilities on Ford and Esquire Financial 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 Esquire Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Esquire Financial.
Diversification Opportunities for Ford and Esquire Financial
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Esquire is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Esquire Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esquire Financial 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 Esquire Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esquire Financial has no effect on the direction of Ford i.e., Ford and Esquire Financial go up and down completely randomly.
Pair Corralation between Ford and Esquire Financial
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.32 times more return on investment than Esquire Financial. However, Ford is 1.32 times more volatile than Esquire Financial Holdings. It trades about 0.09 of its potential returns per unit of risk. Esquire Financial Holdings is currently generating about 0.06 per unit of risk. If you would invest 1,244 in Ford Motor on January 26, 2024 and sell it today you would earn a total of 51.00 from holding Ford Motor or generate 4.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Esquire Financial Holdings
Performance |
| Timeline |
| Ford Motor |
| Esquire Financial |
Ford and Esquire Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Esquire Financial
The main advantage of trading using opposite Ford and Esquire Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Esquire Financial 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 Esquire Financial will offset losses from the drop in Esquire Financial's long position.The idea behind Ford Motor and Esquire Financial Holdings 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.| Esquire Financial vs. HMN Financial | Esquire Financial vs. Home Federal Bancorp | Esquire Financial vs. First Financial Northwest | Esquire Financial vs. First Northwest Bancorp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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