Correlation Between Ford and Foremost Lithium
Can any of the company-specific risk be diversified away by investing in both Ford and Foremost Lithium 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 Foremost Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Foremost Lithium Resource, you can compare the effects of market volatilities on Ford and Foremost Lithium 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 Foremost Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Foremost Lithium.
Diversification Opportunities for Ford and Foremost Lithium
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Foremost is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Foremost Lithium Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foremost Lithium Resource 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 Foremost Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foremost Lithium Resource has no effect on the direction of Ford i.e., Ford and Foremost Lithium go up and down completely randomly.
Pair Corralation between Ford and Foremost Lithium
Taking into account the 90-day investment horizon Ford is expected to generate 63.32 times less return on investment than Foremost Lithium. But when comparing it to its historical volatility, Ford Motor is 9.82 times less risky than Foremost Lithium. It trades about 0.01 of its potential returns per unit of risk. Foremost Lithium Resource is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 62.00 in Foremost Lithium Resource on August 29, 2024 and sell it today you would lose (30.00) from holding Foremost Lithium Resource or give up 48.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 50.13% |
| Values | Daily Returns |
Ford Motor vs. Foremost Lithium Resource
Performance |
| Timeline |
| Ford Motor |
| Foremost Lithium Resource |
Ford and Foremost Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Foremost Lithium
The main advantage of trading using opposite Ford and Foremost Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Foremost Lithium 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 Foremost Lithium will offset losses from the drop in Foremost Lithium's long position.The idea behind Ford Motor and Foremost Lithium Resource 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.| Foremost Lithium vs. Presidio Property Trust | Foremost Lithium vs. Femasys | Foremost Lithium vs. Western Asset Investment | Foremost Lithium vs. MGIC Investment 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |