Correlation Between Ford and IAMGold
Can any of the company-specific risk be diversified away by investing in both Ford and IAMGold 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 IAMGold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and IAMGold, you can compare the effects of market volatilities on Ford and IAMGold 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 IAMGold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and IAMGold.
Diversification Opportunities for Ford and IAMGold
Modest diversification
The 3 months correlation between Ford and IAMGold is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and IAMGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAMGold 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 IAMGold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAMGold has no effect on the direction of Ford i.e., Ford and IAMGold go up and down completely randomly.
Pair Corralation between Ford and IAMGold
Taking into account the 90-day investment horizon Ford is expected to generate 7.6 times less return on investment than IAMGold. But when comparing it to its historical volatility, Ford Motor is 1.49 times less risky than IAMGold. It trades about 0.01 of its potential returns per unit of risk. IAMGold is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 290.00 in IAMGold on August 28, 2024 and sell it today you would earn a total of 458.00 from holding IAMGold or generate 157.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Ford Motor vs. IAMGold
Performance |
| Timeline |
| Ford Motor |
| IAMGold |
Ford and IAMGold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and IAMGold
The main advantage of trading using opposite Ford and IAMGold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, IAMGold 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 IAMGold will offset losses from the drop in IAMGold's long position.The idea behind Ford Motor and IAMGold 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |