Correlation Between Ford and Atlas Energy
Can any of the company-specific risk be diversified away by investing in both Ford and Atlas Energy 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 Atlas Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Atlas Energy Solutions, you can compare the effects of market volatilities on Ford and Atlas Energy 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 Atlas Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Atlas Energy.
Diversification Opportunities for Ford and Atlas Energy
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Atlas is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Atlas Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Energy Solutions 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 Atlas Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Energy Solutions has no effect on the direction of Ford i.e., Ford and Atlas Energy go up and down completely randomly.
Pair Corralation between Ford and Atlas Energy
Taking into account the 90-day investment horizon Ford is expected to generate 2.49 times less return on investment than Atlas Energy. But when comparing it to its historical volatility, Ford Motor is 1.72 times less risky than Atlas Energy. It trades about 0.17 of its potential returns per unit of risk. Atlas Energy Solutions is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,962 in Atlas Energy Solutions on August 31, 2024 and sell it today you would earn a total of 380.00 from holding Atlas Energy Solutions or generate 19.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Atlas Energy Solutions
Performance |
| Timeline |
| Ford Motor |
| Atlas Energy Solutions |
Ford and Atlas Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Atlas Energy
The main advantage of trading using opposite Ford and Atlas Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Atlas Energy 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 Atlas Energy will offset losses from the drop in Atlas Energy's long position.The idea behind Ford Motor and Atlas Energy Solutions 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.| Atlas Energy vs. ProPetro Holding Corp | Atlas Energy vs. Ranger Energy Services | Atlas Energy vs. Flotek Industries | Atlas Energy vs. Liberty Oilfield Services |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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