Correlation Between Ford and Visa
Can any of the company-specific risk be diversified away by investing in both Ford and Visa 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 Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Visa Class A, you can compare the effects of market volatilities on Ford and Visa 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 Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Visa.
Diversification Opportunities for Ford and Visa
Weak diversification
The 3 months correlation between Ford and Visa is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Ford i.e., Ford and Visa go up and down completely randomly.
Pair Corralation between Ford and Visa
Taking into account the 90-day investment horizon Ford Motor is expected to generate 3.61 times more return on investment than Visa. However, Ford is 3.61 times more volatile than Visa Class A. It trades about 0.09 of its potential returns per unit of risk. Visa Class A is currently generating about -0.14 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 Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Ford Motor vs. Visa Class A
Performance |
Timeline |
Ford Motor |
Visa Class A |
Ford and Visa Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Visa
The main advantage of trading using opposite Ford and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.Ford vs. Hycroft Mining Holding | Ford vs. Imperial Petroleum | Ford vs. Exela Technologies | Ford vs. Camber Energy |
Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |