Correlation Between Ford and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both Ford and Equinor ASA 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 Equinor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Equinor ASA ADR, you can compare the effects of market volatilities on Ford and Equinor ASA 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 Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Equinor ASA.
Diversification Opportunities for Ford and Equinor ASA
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and Equinor is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Equinor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA ADR 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 Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA ADR has no effect on the direction of Ford i.e., Ford and Equinor ASA go up and down completely randomly.
Pair Corralation between Ford and Equinor ASA
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Equinor ASA. In addition to that, Ford is 2.04 times more volatile than Equinor ASA ADR. It trades about -0.1 of its total potential returns per unit of risk. Equinor ASA ADR is currently generating about -0.09 per unit of volatility. If you would invest 2,766 in Equinor ASA ADR on February 2, 2024 and sell it today you would lose (67.00) from holding Equinor ASA ADR or give up 2.42% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Ford Motor vs. Equinor ASA ADR
Performance |
Timeline |
Ford Motor |
Equinor ASA ADR |
Ford and Equinor ASA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Equinor ASA
The main advantage of trading using opposite Ford and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Equinor ASA 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 Equinor ASA will offset losses from the drop in Equinor ASA's long position.Ford vs. Hycroft Mining Holding | Ford vs. Imperial Petroleum | Ford vs. Exela Technologies | Ford vs. Camber Energy |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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