Correlation Between Ford and New Age
Can any of the company-specific risk be diversified away by investing in both Ford and New Age 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 New Age into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and New Age Metals, you can compare the effects of market volatilities on Ford and New Age 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 New Age. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and New Age.
Diversification Opportunities for Ford and New Age
Very weak diversification
The 3 months correlation between Ford and New is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and New Age Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Age 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 New Age. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Age Metals has no effect on the direction of Ford i.e., Ford and New Age go up and down completely randomly.
Pair Corralation between Ford and New Age
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.19 times more return on investment than New Age. However, Ford Motor is 5.29 times less risky than New Age. It trades about -0.18 of its potential returns per unit of risk. New Age Metals is currently generating about -0.05 per unit of risk. If you would invest 1,140 in Ford Motor on October 26, 2024 and sell it today you would lose (126.50) from holding Ford Motor or give up 11.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. New Age Metals
Performance |
| Timeline |
| Ford Motor |
| New Age Metals |
Ford and New Age Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and New Age
The main advantage of trading using opposite Ford and New Age positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, New Age 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 New Age will offset losses from the drop in New Age's long position.The idea behind Ford Motor and New Age Metals 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.| New Age vs. Vision Lithium | New Age vs. Group Ten Metals | New Age vs. Generation Mining Limited | New Age vs. Nickel Creek Platinum |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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