Correlation Between Ford and Aura Energy
Can any of the company-specific risk be diversified away by investing in both Ford and Aura 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 Aura 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 Aura Energy Limited, you can compare the effects of market volatilities on Ford and Aura 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 Aura Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Aura Energy.
Diversification Opportunities for Ford and Aura Energy
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Aura is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aura Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Energy Limited 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 Aura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Energy Limited has no effect on the direction of Ford i.e., Ford and Aura Energy go up and down completely randomly.
Pair Corralation between Ford and Aura Energy
Taking into account the 90-day investment horizon Ford is expected to generate 3.39 times less return on investment than Aura Energy. But when comparing it to its historical volatility, Ford Motor is 9.99 times less risky than Aura Energy. It trades about 0.23 of its potential returns per unit of risk. Aura Energy Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Aura Energy Limited on September 1, 2024 and sell it today you would earn a total of 0.00 from holding Aura Energy Limited or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Aura Energy Limited
Performance |
| Timeline |
| Ford Motor |
| Aura Energy Limited |
Ford and Aura Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Aura Energy
The main advantage of trading using opposite Ford and Aura Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Aura 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 Aura Energy will offset losses from the drop in Aura Energy's long position.The idea behind Ford Motor and Aura Energy Limited 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.| Aura Energy vs. Isoenergy | Aura Energy vs. Paladin Energy | Aura Energy vs. F3 Uranium Corp | Aura Energy vs. enCore Energy Corp |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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