Correlation Between Ford and Lifezone Metals
Can any of the company-specific risk be diversified away by investing in both Ford and Lifezone Metals 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 Lifezone Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Lifezone Metals Limited, you can compare the effects of market volatilities on Ford and Lifezone Metals 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 Lifezone Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Lifezone Metals.
Diversification Opportunities for Ford and Lifezone Metals
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Lifezone is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Lifezone Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifezone Metals 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 Lifezone Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifezone Metals has no effect on the direction of Ford i.e., Ford and Lifezone Metals go up and down completely randomly.
Pair Corralation between Ford and Lifezone Metals
Taking into account the 90-day investment horizon Ford is expected to generate 23.15 times less return on investment than Lifezone Metals. But when comparing it to its historical volatility, Ford Motor is 1.06 times less risky than Lifezone Metals. It trades about 0.01 of its potential returns per unit of risk. Lifezone Metals Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 628.00 in Lifezone Metals Limited on August 27, 2024 and sell it today you would earn a total of 55.00 from holding Lifezone Metals Limited or generate 8.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Lifezone Metals Limited
Performance |
| Timeline |
| Ford Motor |
| Lifezone Metals |
Ford and Lifezone Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Lifezone Metals
The main advantage of trading using opposite Ford and Lifezone Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Lifezone Metals 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 Lifezone Metals will offset losses from the drop in Lifezone Metals' long position.The idea behind Ford Motor and Lifezone Metals Limited 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.| Lifezone Metals vs. Vale SA ADR | Lifezone Metals vs. Teck Resources Ltd | Lifezone Metals vs. MP Materials Corp | Lifezone Metals vs. BHP Group Limited |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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