Correlation Between Ford and Lithium South
Can any of the company-specific risk be diversified away by investing in both Ford and Lithium South 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 Lithium South into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Lithium South Development, you can compare the effects of market volatilities on Ford and Lithium South 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 Lithium South. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Lithium South.
Diversification Opportunities for Ford and Lithium South
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and Lithium is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Lithium South Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium South Development 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 Lithium South. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium South Development has no effect on the direction of Ford i.e., Ford and Lithium South go up and down completely randomly.
Pair Corralation between Ford and Lithium South
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.37 times more return on investment than Lithium South. However, Ford Motor is 2.68 times less risky than Lithium South. It trades about 0.0 of its potential returns per unit of risk. Lithium South Development is currently generating about -0.05 per unit of risk. If you would invest 1,236 in Ford Motor on August 31, 2024 and sell it today you would lose (123.00) from holding Ford Motor or give up 9.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Ford Motor vs. Lithium South Development
Performance |
| Timeline |
| Ford Motor |
| Lithium South Development |
Ford and Lithium South Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Lithium South
The main advantage of trading using opposite Ford and Lithium South positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Lithium South 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 Lithium South will offset losses from the drop in Lithium South's long position.The idea behind Ford Motor and Lithium South Development 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.| Lithium South vs. Solar Alliance Energy | Lithium South vs. Global X Active | Lithium South vs. Financial 15 Split | Lithium South vs. Rubicon Organics |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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