Correlation Between Ford and Argentina Lithium
Can any of the company-specific risk be diversified away by investing in both Ford and Argentina Lithium 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 Argentina Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Argentina Lithium Energy, you can compare the effects of market volatilities on Ford and Argentina Lithium 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 Argentina Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Argentina Lithium.
Diversification Opportunities for Ford and Argentina Lithium
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Argentina is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Argentina Lithium Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argentina Lithium Energy 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 Argentina Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argentina Lithium Energy has no effect on the direction of Ford i.e., Ford and Argentina Lithium go up and down completely randomly.
Pair Corralation between Ford and Argentina Lithium
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.39 times more return on investment than Argentina Lithium. However, Ford Motor is 2.59 times less risky than Argentina Lithium. It trades about 0.18 of its potential returns per unit of risk. Argentina Lithium Energy is currently generating about -0.03 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. Argentina Lithium Energy
Performance |
| Timeline |
| Ford Motor |
| Argentina Lithium Energy |
Ford and Argentina Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Argentina Lithium
The main advantage of trading using opposite Ford and Argentina Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Argentina Lithium 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 Argentina Lithium will offset losses from the drop in Argentina Lithium's long position.The idea behind Ford Motor and Argentina Lithium Energy 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.| Argentina Lithium vs. Lithium Chile | Argentina Lithium vs. International Lithium Corp | Argentina Lithium vs. Noram Lithium Corp | Argentina Lithium vs. Imagine Lithium |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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