Correlation Between Ford and Marathon Oil
Can any of the company-specific risk be diversified away by investing in both Ford and Marathon Oil 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 Marathon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Marathon Oil Corp, you can compare the effects of market volatilities on Ford and Marathon Oil 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 Marathon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Marathon Oil.
Diversification Opportunities for Ford and Marathon Oil
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Marathon is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Marathon Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Oil Corp 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 Marathon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Oil Corp has no effect on the direction of Ford i.e., Ford and Marathon Oil go up and down completely randomly.
Pair Corralation between Ford and Marathon Oil
Taking into account the 90-day investment horizon Ford is expected to generate 23.97 times less return on investment than Marathon Oil. In addition to that, Ford is 1.01 times more volatile than Marathon Oil Corp. It trades about 0.0 of its total potential returns per unit of risk. Marathon Oil Corp is currently generating about 0.11 per unit of volatility. If you would invest 2,590 in Marathon Oil Corp on September 12, 2024 and sell it today you would earn a total of 286.00 from holding Marathon Oil Corp or generate 11.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 81.25% |
| Values | Daily Returns |
Ford Motor vs. Marathon Oil Corp
Performance |
| Timeline |
| Ford Motor |
| Marathon Oil Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Ford and Marathon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Marathon Oil
The main advantage of trading using opposite Ford and Marathon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Marathon Oil 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 Marathon Oil will offset losses from the drop in Marathon Oil's long position.The idea behind Ford Motor and Marathon Oil Corp 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.| Marathon Oil vs. Beazer Homes USA | Marathon Oil vs. Infrastrutture Wireless Italiane | Marathon Oil vs. Synthomer plc | Marathon Oil vs. Vitec Software Group |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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