Correlation Between Ford and Capricorn Metals
Can any of the company-specific risk be diversified away by investing in both Ford and Capricorn Metals 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 Capricorn Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Capricorn Metals, you can compare the effects of market volatilities on Ford and Capricorn Metals 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 Capricorn Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Capricorn Metals.
Diversification Opportunities for Ford and Capricorn Metals
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Capricorn is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Capricorn Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricorn Metals 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 Capricorn Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricorn Metals has no effect on the direction of Ford i.e., Ford and Capricorn Metals go up and down completely randomly.
Pair Corralation between Ford and Capricorn Metals
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Capricorn Metals. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.25 times less risky than Capricorn Metals. The stock trades about -0.02 of its potential returns per unit of risk. The Capricorn Metals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 578.00 in Capricorn Metals on November 2, 2024 and sell it today you would earn a total of 185.00 from holding Capricorn Metals or generate 32.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.04% |
| Values | Daily Returns |
Ford Motor vs. Capricorn Metals
Performance |
| Timeline |
| Ford Motor |
| Capricorn Metals |
Ford and Capricorn Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Capricorn Metals
The main advantage of trading using opposite Ford and Capricorn Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Capricorn Metals 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 Capricorn Metals will offset losses from the drop in Capricorn Metals' long position.The idea behind Ford Motor and Capricorn Metals 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.| Capricorn Metals vs. Perseus Mining | Capricorn Metals vs. Hutchison Telecommunications | Capricorn Metals vs. Viva Leisure | Capricorn Metals vs. MetalsGrove Mining |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |