Correlation Between Ford and International Metals
Can any of the company-specific risk be diversified away by investing in both Ford and International 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 International 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 International Metals Mining, you can compare the effects of market volatilities on Ford and International 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 International Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and International Metals.
Diversification Opportunities for Ford and International Metals
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and International is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and International Metals Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International 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 International Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Metals has no effect on the direction of Ford i.e., Ford and International Metals go up and down completely randomly.
Pair Corralation between Ford and International Metals
Taking into account the 90-day investment horizon Ford is expected to generate 168.25 times less return on investment than International Metals. But when comparing it to its historical volatility, Ford Motor is 5.02 times less risky than International Metals. It trades about 0.0 of its potential returns per unit of risk. International Metals Mining is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 64.00 in International Metals Mining on October 29, 2024 and sell it today you would lose (56.00) from holding International Metals Mining or give up 87.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Ford Motor vs. International Metals Mining
Performance |
| Timeline |
| Ford Motor |
| International Metals |
Ford and International Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and International Metals
The main advantage of trading using opposite Ford and International Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, International 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 International Metals will offset losses from the drop in International Metals' long position.The idea behind Ford Motor and International Metals 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.| International Metals vs. Dolly Varden Silver | International Metals vs. Reyna Silver Corp | International Metals vs. Aztec Minerals Corp | International Metals vs. Aftermath Silver |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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