Correlation Between Ford and E3 Metals
Can any of the company-specific risk be diversified away by investing in both Ford and E3 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 E3 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 E3 Metals Corp, you can compare the effects of market volatilities on Ford and E3 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 E3 Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and E3 Metals.
Diversification Opportunities for Ford and E3 Metals
Very weak diversification
The 3 months correlation between Ford and EEMMF is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and E3 Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E3 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 E3 Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E3 Metals Corp has no effect on the direction of Ford i.e., Ford and E3 Metals go up and down completely randomly.
Pair Corralation between Ford and E3 Metals
Taking into account the 90-day investment horizon Ford is expected to generate 1.06 times less return on investment than E3 Metals. But when comparing it to its historical volatility, Ford Motor is 2.41 times less risky than E3 Metals. It trades about 0.21 of its potential returns per unit of risk. E3 Metals Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 65.00 in E3 Metals Corp on October 23, 2024 and sell it today you would earn a total of 3.00 from holding E3 Metals Corp or generate 4.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Ford Motor vs. E3 Metals Corp
Performance |
| Timeline |
| Ford Motor |
| E3 Metals Corp |
Ford and E3 Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and E3 Metals
The main advantage of trading using opposite Ford and E3 Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, E3 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 E3 Metals will offset losses from the drop in E3 Metals' long position.The idea behind Ford Motor and E3 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.| E3 Metals vs. Altura Mining Limited | E3 Metals vs. Frontier Lithium | E3 Metals vs. Savannah Resources Plc | E3 Metals vs. Lithium Ionic 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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