Correlation Between Ford and Loncor Resources
Can any of the company-specific risk be diversified away by investing in both Ford and Loncor 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 Loncor 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 Loncor Resources, you can compare the effects of market volatilities on Ford and Loncor 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 Loncor Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Loncor Resources.
Diversification Opportunities for Ford and Loncor Resources
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Loncor is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Loncor Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loncor Resources 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 Loncor Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loncor Resources has no effect on the direction of Ford i.e., Ford and Loncor Resources go up and down completely randomly.
Pair Corralation between Ford and Loncor Resources
Taking into account the 90-day investment horizon Ford is expected to generate 3.8 times less return on investment than Loncor Resources. But when comparing it to its historical volatility, Ford Motor is 1.73 times less risky than Loncor Resources. It trades about 0.03 of its potential returns per unit of risk. Loncor Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 32.00 in Loncor Resources on September 3, 2024 and sell it today you would earn a total of 14.00 from holding Loncor Resources or generate 43.75% 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. Loncor Resources
Performance |
| Timeline |
| Ford Motor |
| Loncor Resources |
Ford and Loncor Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Loncor Resources
The main advantage of trading using opposite Ford and Loncor Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Loncor 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 Loncor Resources will offset losses from the drop in Loncor Resources' long position.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. Ford Motor |
| Loncor Resources vs. Algoma Steel Group | Loncor Resources vs. Champion Iron | Loncor Resources vs. International Zeolite Corp | Loncor Resources vs. European Residential Real |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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