Correlation Between Ford and GR Silver
Can any of the company-specific risk be diversified away by investing in both Ford and GR Silver 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 GR Silver into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and GR Silver Mining, you can compare the effects of market volatilities on Ford and GR Silver 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 GR Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and GR Silver.
Diversification Opportunities for Ford and GR Silver
Good diversification
The 3 months correlation between Ford and GRSLF is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and GR Silver Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GR Silver 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 GR Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GR Silver Mining has no effect on the direction of Ford i.e., Ford and GR Silver go up and down completely randomly.
Pair Corralation between Ford and GR Silver
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.3 times more return on investment than GR Silver. However, Ford Motor is 3.29 times less risky than GR Silver. It trades about 0.25 of its potential returns per unit of risk. GR Silver Mining is currently generating about -0.02 per unit of risk. If you would invest 1,008 in Ford Motor on September 2, 2024 and sell it today you would earn a total of 105.00 from holding Ford Motor or generate 10.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. GR Silver Mining
Performance |
| Timeline |
| Ford Motor |
| GR Silver Mining |
Ford and GR Silver Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and GR Silver
The main advantage of trading using opposite Ford and GR Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, GR Silver 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 GR Silver will offset losses from the drop in GR Silver's long position.The idea behind Ford Motor and GR Silver 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.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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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