Correlation Between Ford and Northern Lion
Can any of the company-specific risk be diversified away by investing in both Ford and Northern Lion 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 Northern Lion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Northern Lion Gold, you can compare the effects of market volatilities on Ford and Northern Lion 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 Northern Lion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Northern Lion.
Diversification Opportunities for Ford and Northern Lion
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ford and Northern is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Northern Lion Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lion Gold 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 Northern Lion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lion Gold has no effect on the direction of Ford i.e., Ford and Northern Lion go up and down completely randomly.
Pair Corralation between Ford and Northern Lion
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.34 times more return on investment than Northern Lion. However, Ford is 1.34 times more volatile than Northern Lion Gold. It trades about 0.02 of its potential returns per unit of risk. Northern Lion Gold is currently generating about -0.04 per unit of risk. If you would invest 961.00 in Ford Motor on September 13, 2024 and sell it today you would earn a total of 80.00 from holding Ford Motor or generate 8.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Northern Lion Gold
Performance |
| Timeline |
| Ford Motor |
| Northern Lion Gold |
Ford and Northern Lion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Northern Lion
The main advantage of trading using opposite Ford and Northern Lion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Northern Lion 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 Northern Lion will offset losses from the drop in Northern Lion's long position.The idea behind Ford Motor and Northern Lion Gold 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.| Northern Lion vs. Boston Beer | Northern Lion vs. Sealed Air | Northern Lion vs. Park Electrochemical | Northern Lion vs. Westrock Coffee |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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