Correlation Between Ford and BCM Resources
Can any of the company-specific risk be diversified away by investing in both Ford and BCM Resources 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 BCM Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BCM Resources, you can compare the effects of market volatilities on Ford and BCM Resources 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 BCM Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BCM Resources.
Diversification Opportunities for Ford and BCM Resources
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and BCM is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BCM Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCM Resources 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 BCM Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCM Resources has no effect on the direction of Ford i.e., Ford and BCM Resources go up and down completely randomly.
Pair Corralation between Ford and BCM Resources
Taking into account the 90-day investment horizon Ford is expected to generate 6.59 times less return on investment than BCM Resources. But when comparing it to its historical volatility, Ford Motor is 5.65 times less risky than BCM Resources. It trades about 0.23 of its potential returns per unit of risk. BCM Resources is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 2.00 in BCM Resources on September 1, 2024 and sell it today you would earn a total of 1.53 from holding BCM Resources or generate 76.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Ford Motor vs. BCM Resources
Performance |
| Timeline |
| Ford Motor |
| BCM Resources |
Ford and BCM Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BCM Resources
The main advantage of trading using opposite Ford and BCM Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, BCM Resources 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 BCM Resources will offset losses from the drop in BCM Resources' long position.The idea behind Ford Motor and BCM Resources 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.| BCM Resources vs. Liontown Resources Limited | BCM Resources vs. ATT Inc | BCM Resources vs. Merck Company | BCM Resources vs. Walt Disney |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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