Correlation Between Ford and Southern Copper
Can any of the company-specific risk be diversified away by investing in both Ford and Southern Copper 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 Southern Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Southern Copper Corp, you can compare the effects of market volatilities on Ford and Southern Copper 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 Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Southern Copper.
Diversification Opportunities for Ford and Southern Copper
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Southern is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Southern Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper Corp has no effect on the direction of Ford i.e., Ford and Southern Copper go up and down completely randomly.
Pair Corralation between Ford and Southern Copper
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.1 times more return on investment than Southern Copper. However, Ford is 1.1 times more volatile than Southern Copper Corp. It trades about 0.01 of its potential returns per unit of risk. Southern Copper Corp is currently generating about -0.04 per unit of risk. If you would invest 1,135 in Ford Motor on August 25, 2024 and sell it today you would lose (17.00) from holding Ford Motor or give up 1.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Ford Motor vs. Southern Copper Corp
Performance |
| Timeline |
| Ford Motor |
| Southern Copper Corp |
Ford and Southern Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Southern Copper
The main advantage of trading using opposite Ford and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Southern Copper 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 Southern Copper will offset losses from the drop in Southern Copper's long position.The idea behind Ford Motor and Southern Copper 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.| Southern Copper vs. Quadrise Plc | Southern Copper vs. Intuitive Investments Group | Southern Copper vs. European Metals Holdings | Southern Copper vs. Athelney Trust plc |
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 CEOs Directory module to screen CEOs from public companies around the world.
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