Correlation Between Blue Bird and Ford
Can any of the company-specific risk be diversified away by investing in both Blue Bird 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 Blue Bird and Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Bird Corp and Ford Motor, you can compare the effects of market volatilities on Blue Bird 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 Blue Bird with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Bird and Ford.
Diversification Opportunities for Blue Bird and Ford
Very poor diversification
The 3 months correlation between Blue and Ford is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Blue Bird Corp and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Blue Bird 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 Blue Bird Corp 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 Blue Bird i.e., Blue Bird and Ford go up and down completely randomly.
Pair Corralation between Blue Bird and Ford
Given the investment horizon of 90 days Blue Bird Corp is expected to generate 1.7 times more return on investment than Ford. However, Blue Bird is 1.7 times more volatile than Ford Motor. It trades about 0.06 of its potential returns per unit of risk. Ford Motor is currently generating about 0.01 per unit of risk. If you would invest 1,753 in Blue Bird Corp on December 30, 2023 and sell it today you would earn a total of 2,081 from holding Blue Bird Corp or generate 118.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Blue Bird Corp vs. Ford Motor
Performance |
Timeline |
Blue Bird Corp |
Ford Motor |
Blue Bird and Ford Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Blue Bird and Ford
The main advantage of trading using opposite Blue Bird and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Bird 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.Blue Bird vs. General Motors | Blue Bird vs. Li AutoInc | Blue Bird vs. Lotus Technology Warrants | Blue Bird vs. Volcon Inc |
Ford vs. Lotus Technology Warrants | Ford vs. GreenPower Motor | Ford vs. Mullen Automotive | Ford vs. HYZON Motors |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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