Correlation Between Ford and Northern Star
Can any of the company-specific risk be diversified away by investing in both Ford and Northern Star 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 Star 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 Star Resources, you can compare the effects of market volatilities on Ford and Northern Star 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 Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Northern Star.
Diversification Opportunities for Ford and Northern Star
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and Northern is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Northern Star Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Star Resources 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 Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Star Resources has no effect on the direction of Ford i.e., Ford and Northern Star go up and down completely randomly.
Pair Corralation between Ford and Northern Star
Taking into account the 90-day investment horizon Ford is expected to generate 5.25 times less return on investment than Northern Star. In addition to that, Ford is 1.02 times more volatile than Northern Star Resources. It trades about 0.01 of its total potential returns per unit of risk. Northern Star Resources is currently generating about 0.06 per unit of volatility. If you would invest 623.00 in Northern Star Resources on August 27, 2024 and sell it today you would earn a total of 471.00 from holding Northern Star Resources or generate 75.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.22% |
| Values | Daily Returns |
Ford Motor vs. Northern Star Resources
Performance |
| Timeline |
| Ford Motor |
| Northern Star Resources |
Ford and Northern Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Northern Star
The main advantage of trading using opposite Ford and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Northern Star 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 Star will offset losses from the drop in Northern Star's long position.The idea behind Ford Motor and Northern Star Resources 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 Star vs. Franco Nevada | Northern Star vs. Agnico Eagle Mines | Northern Star vs. Superior Plus Corp | Northern Star vs. NMI Holdings |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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