Correlation Between Ford and Sprott Copper
Can any of the company-specific risk be diversified away by investing in both Ford and Sprott 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 Sprott 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 Sprott Copper Miners, you can compare the effects of market volatilities on Ford and Sprott 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 Sprott Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Sprott Copper.
Diversification Opportunities for Ford and Sprott Copper
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Sprott is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sprott Copper Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Copper Miners 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 Sprott Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Copper Miners has no effect on the direction of Ford i.e., Ford and Sprott Copper go up and down completely randomly.
Pair Corralation between Ford and Sprott Copper
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.38 times more return on investment than Sprott Copper. However, Ford is 1.38 times more volatile than Sprott Copper Miners. It trades about 0.0 of its potential returns per unit of risk. Sprott Copper Miners is currently generating about -0.17 per unit of risk. If you would invest 1,122 in Ford Motor on August 29, 2024 and sell it today you would lose (12.00) from holding Ford Motor or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Sprott Copper Miners
Performance |
| Timeline |
| Ford Motor |
| Sprott Copper Miners |
Ford and Sprott Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Sprott Copper
The main advantage of trading using opposite Ford and Sprott Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Sprott 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 Sprott Copper will offset losses from the drop in Sprott Copper's long position.The idea behind Ford Motor and Sprott Copper Miners 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.| Sprott Copper vs. First Trust Exchange Traded | Sprott Copper vs. Ultimus Managers Trust | Sprott Copper vs. Horizon Kinetics Medical | Sprott Copper vs. Harbor Health Care |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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