Correlation Between Ford and Imperial Metals
Can any of the company-specific risk be diversified away by investing in both Ford and Imperial 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 Imperial 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 Imperial Metals, you can compare the effects of market volatilities on Ford and Imperial 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 Imperial Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Imperial Metals.
Diversification Opportunities for Ford and Imperial Metals
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Imperial is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Imperial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Metals 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 Imperial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Metals has no effect on the direction of Ford i.e., Ford and Imperial Metals go up and down completely randomly.
Pair Corralation between Ford and Imperial Metals
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.91 times more return on investment than Imperial Metals. However, Ford Motor is 1.1 times less risky than Imperial Metals. It trades about 0.17 of its potential returns per unit of risk. Imperial Metals is currently generating about 0.04 per unit of risk. If you would invest 1,033 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 77.00 from holding Ford Motor or generate 7.45% 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. Imperial Metals
Performance |
| Timeline |
| Ford Motor |
| Imperial Metals |
Ford and Imperial Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Imperial Metals
The main advantage of trading using opposite Ford and Imperial Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Imperial 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 Imperial Metals will offset losses from the drop in Imperial Metals' long position.The idea behind Ford Motor and Imperial Metals 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.| Imperial Metals vs. Taseko Mines | Imperial Metals vs. Mountain Boy Minerals | Imperial Metals vs. iMetal Resources | Imperial Metals vs. Western Copper and |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Commodity Directory Find actively traded commodities issued by global exchanges |