Correlation Between Lowes Companies and Ford
Can any of the company-specific risk be diversified away by investing in both Lowes Companies and Ford 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 Lowes Companies and Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and Ford Motor, you can compare the effects of market volatilities on Lowes Companies and Ford 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 Lowes Companies with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and Ford.
Diversification Opportunities for Lowes Companies and Ford
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lowes and Ford is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Lowes Companies 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 Lowes Companies are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Lowes Companies i.e., Lowes Companies and Ford go up and down completely randomly.
Pair Corralation between Lowes Companies and Ford
Considering the 90-day investment horizon Lowes Companies is expected to generate 0.58 times more return on investment than Ford. However, Lowes Companies is 1.72 times less risky than Ford. It trades about 0.13 of its potential returns per unit of risk. Ford Motor is currently generating about 0.04 per unit of risk. If you would invest 18,634 in Lowes Companies on January 19, 2024 and sell it today you would earn a total of 4,507 from holding Lowes Companies or generate 24.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowes Companies vs. Ford Motor
Performance |
| Timeline |
| Lowes Companies |
| Ford Motor |
Lowes Companies and Ford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and Ford
The main advantage of trading using opposite Lowes Companies and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.| Lowes Companies vs. Floor Decor Holdings | Lowes Companies vs. LL Flooring Holdings | Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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