Correlation Between Ford and Critical Metals
Can any of the company-specific risk be diversified away by investing in both Ford and Critical 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 Critical 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 Critical Metals Corp, you can compare the effects of market volatilities on Ford and Critical 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 Critical Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Critical Metals.
Diversification Opportunities for Ford and Critical Metals
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and Critical is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Critical Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Critical Metals Corp 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 Critical Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Critical Metals Corp has no effect on the direction of Ford i.e., Ford and Critical Metals go up and down completely randomly.
Pair Corralation between Ford and Critical Metals
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Critical Metals. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.35 times less risky than Critical Metals. The stock trades about 0.0 of its potential returns per unit of risk. The Critical Metals Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 623.00 in Critical Metals Corp on August 29, 2024 and sell it today you would earn a total of 23.00 from holding Critical Metals Corp or generate 3.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Critical Metals Corp
Performance |
| Timeline |
| Ford Motor |
| Critical Metals Corp |
Ford and Critical Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Critical Metals
The main advantage of trading using opposite Ford and Critical Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Critical 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 Critical Metals will offset losses from the drop in Critical Metals' long position.The idea behind Ford Motor and Critical Metals Corp 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.| Critical Metals vs. Vale SA ADR | Critical Metals vs. BHP Group Limited | Critical Metals vs. Glencore PLC ADR | Critical Metals vs. Piedmont Lithium Ltd |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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