Correlation Between Ford and Kenmare Resources
Can any of the company-specific risk be diversified away by investing in both Ford and Kenmare Resources 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 Kenmare Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Kenmare Resources PLC, you can compare the effects of market volatilities on Ford and Kenmare Resources 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 Kenmare Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Kenmare Resources.
Diversification Opportunities for Ford and Kenmare Resources
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Kenmare is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Kenmare Resources PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenmare Resources PLC 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 Kenmare Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenmare Resources PLC has no effect on the direction of Ford i.e., Ford and Kenmare Resources go up and down completely randomly.
Pair Corralation between Ford and Kenmare Resources
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.22 times more return on investment than Kenmare Resources. However, Ford is 1.22 times more volatile than Kenmare Resources PLC. It trades about 0.18 of its potential returns per unit of risk. Kenmare Resources PLC is currently generating about 0.06 per unit of risk. If you would invest 1,027 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 83.00 from holding Ford Motor or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Kenmare Resources PLC
Performance |
| Timeline |
| Ford Motor |
| Kenmare Resources PLC |
Ford and Kenmare Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Kenmare Resources
The main advantage of trading using opposite Ford and Kenmare Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Kenmare Resources 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 Kenmare Resources will offset losses from the drop in Kenmare Resources' long position.The idea behind Ford Motor and Kenmare Resources PLC 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.| Kenmare Resources vs. AIB Group PLC | Kenmare Resources vs. Dalata Hotel Group | Kenmare Resources vs. Uniphar Group PLC | Kenmare Resources vs. Greencoat Renewables PLC |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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