Correlation Between Ford and Mountain Boy
Can any of the company-specific risk be diversified away by investing in both Ford and Mountain Boy 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 Mountain Boy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Mountain Boy Minerals, you can compare the effects of market volatilities on Ford and Mountain Boy 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 Mountain Boy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Mountain Boy.
Diversification Opportunities for Ford and Mountain Boy
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Mountain is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mountain Boy Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Boy Minerals 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 Mountain Boy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Boy Minerals has no effect on the direction of Ford i.e., Ford and Mountain Boy go up and down completely randomly.
Pair Corralation between Ford and Mountain Boy
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.24 times more return on investment than Mountain Boy. However, Ford Motor is 4.22 times less risky than Mountain Boy. It trades about 0.01 of its potential returns per unit of risk. Mountain Boy Minerals is currently generating about 0.0 per unit of risk. If you would invest 1,080 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 30.00 from holding Ford Motor or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.75% |
| Values | Daily Returns |
Ford Motor vs. Mountain Boy Minerals
Performance |
| Timeline |
| Ford Motor |
| Mountain Boy Minerals |
Ford and Mountain Boy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Mountain Boy
The main advantage of trading using opposite Ford and Mountain Boy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Mountain Boy 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 Mountain Boy will offset losses from the drop in Mountain Boy's long position.The idea behind Ford Motor and Mountain Boy Minerals 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.| Mountain Boy vs. Solar Alliance Energy | Mountain Boy vs. Global X Active | Mountain Boy vs. Financial 15 Split | Mountain Boy 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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