Correlation Between Ford and Ero Copper
Can any of the company-specific risk be diversified away by investing in both Ford and Ero 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 Ero 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 Ero Copper Corp, you can compare the effects of market volatilities on Ford and Ero 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 Ero Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Ero Copper.
Diversification Opportunities for Ford and Ero Copper
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Ero is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Ero Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ero Copper 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 Ero Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ero Copper Corp has no effect on the direction of Ford i.e., Ford and Ero Copper go up and down completely randomly.
Pair Corralation between Ford and Ero Copper
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.86 times more return on investment than Ero Copper. However, Ford Motor is 1.17 times less risky than Ero Copper. It trades about 0.04 of its potential returns per unit of risk. Ero Copper Corp is currently generating about -0.28 per unit of risk. If you would invest 1,122 in Ford Motor on August 28, 2024 and sell it today you would earn a total of 18.00 from holding Ford Motor or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Ero Copper Corp
Performance |
| Timeline |
| Ford Motor |
| Ero Copper Corp |
Ford and Ero Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Ero Copper
The main advantage of trading using opposite Ford and Ero Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Ero 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 Ero Copper will offset losses from the drop in Ero Copper's long position.The idea behind Ford Motor and Ero Copper 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.| Ero Copper vs. Freeport McMoran Copper Gold | Ero Copper vs. Amerigo Resources | Ero Copper vs. Hudbay Minerals | Ero Copper vs. Capstone Copper 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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