Correlation Between Ford and Lucara Diamond
Can any of the company-specific risk be diversified away by investing in both Ford and Lucara Diamond 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 Lucara Diamond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Lucara Diamond Corp, you can compare the effects of market volatilities on Ford and Lucara Diamond 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 Lucara Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Lucara Diamond.
Diversification Opportunities for Ford and Lucara Diamond
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Lucara is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Lucara Diamond Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucara Diamond Corp 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 Lucara Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucara Diamond Corp has no effect on the direction of Ford i.e., Ford and Lucara Diamond go up and down completely randomly.
Pair Corralation between Ford and Lucara Diamond
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.36 times more return on investment than Lucara Diamond. However, Ford Motor is 2.75 times less risky than Lucara Diamond. It trades about 0.08 of its potential returns per unit of risk. Lucara Diamond Corp is currently generating about -0.2 per unit of risk. If you would invest 976.00 in Ford Motor on November 8, 2024 and sell it today you would earn a total of 25.00 from holding Ford Motor or generate 2.56% 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. Lucara Diamond Corp
Performance |
| Timeline |
| Ford Motor |
| Lucara Diamond Corp |
Ford and Lucara Diamond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Lucara Diamond
The main advantage of trading using opposite Ford and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Lucara Diamond 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 Lucara Diamond will offset losses from the drop in Lucara Diamond's long position.The idea behind Ford Motor and Lucara Diamond Corp 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.| Lucara Diamond vs. Mountain Province Diamonds | Lucara Diamond vs. Lundin Gold | Lucara Diamond vs. Mandalay Resources Corp | Lucara Diamond vs. North Arrow Minerals |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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