Correlation Between Ford and Fredonia Mining
Can any of the company-specific risk be diversified away by investing in both Ford and Fredonia Mining 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 Fredonia Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Fredonia Mining, you can compare the effects of market volatilities on Ford and Fredonia Mining 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 Fredonia Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Fredonia Mining.
Diversification Opportunities for Ford and Fredonia Mining
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Fredonia is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fredonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fredonia Mining 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 Fredonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fredonia Mining has no effect on the direction of Ford i.e., Ford and Fredonia Mining go up and down completely randomly.
Pair Corralation between Ford and Fredonia Mining
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.21 times more return on investment than Fredonia Mining. However, Ford Motor is 4.67 times less risky than Fredonia Mining. It trades about -0.23 of its potential returns per unit of risk. Fredonia Mining is currently generating about -0.16 per unit of risk. If you would invest 1,080 in Ford Motor on September 22, 2024 and sell it today you would lose (92.00) from holding Ford Motor or give up 8.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Fredonia Mining
Performance |
| Timeline |
| Ford Motor |
| Fredonia Mining |
Ford and Fredonia Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Fredonia Mining
The main advantage of trading using opposite Ford and Fredonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Fredonia Mining 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 Fredonia Mining will offset losses from the drop in Fredonia Mining's long position.The idea behind Ford Motor and Fredonia Mining 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.| Fredonia Mining vs. Canso Select Opportunities | Fredonia Mining vs. Exco Technologies Limited | Fredonia Mining vs. Precious Metals And | Fredonia Mining vs. Lion One Metals |
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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