Correlation Between Ford and Bed Bath

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Can any of the company-specific risk be diversified away by investing in both Ford and Bed Bath 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 Bed Bath into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Bed Bath Beyond, you can compare the effects of market volatilities on Ford and Bed Bath 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 Bed Bath. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Bed Bath.

Diversification Opportunities for Ford and Bed Bath

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ford and Bed Bath is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Bed Bath Beyond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bed Bath Beyond 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 Bed Bath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bed Bath Beyond has no effect on the direction of Ford i.e., Ford and Bed Bath go up and down completely randomly.

Pair Corralation between Ford and Bed Bath

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.4 times more return on investment than Bed Bath. However, Ford Motor is 2.5 times less risky than Bed Bath. It trades about -0.33 of its potential returns per unit of risk. Bed Bath Beyond is currently generating about -0.32 per unit of risk. If you would invest  1,545  in Ford Motor on July 1, 2022 and sell it today you would lose (327.00)  from holding Ford Motor or give up 21.17% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Bed Bath Beyond

 Performance (%) 
       Timeline  
Ford Motor 
Ford Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Ford Price Channel

Bed Bath Beyond 
Bed Bath Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bed Bath Beyond are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Bed Bath showed solid returns over the last few months and may actually be approaching a breakup point.

Bed Bath Price Channel

Ford and Bed Bath Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Bed Bath

The main advantage of trading using opposite Ford and Bed Bath positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Bed Bath 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 Bed Bath will offset losses from the drop in Bed Bath's long position.
Ford vs. Amazon Inc
The idea behind Ford Motor and Bed Bath Beyond 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.
Bed Bath vs. Best Buy Company
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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