Correlation Between Ford and New Sources
Can any of the company-specific risk be diversified away by investing in both Ford and New Sources 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 Sources 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 Sources Energy, you can compare the effects of market volatilities on Ford and New Sources 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 Sources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and New Sources.
Diversification Opportunities for Ford and New Sources
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and New is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and New Sources Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Sources Energy 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 Sources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Sources Energy has no effect on the direction of Ford i.e., Ford and New Sources go up and down completely randomly.
Pair Corralation between Ford and New Sources
Taking into account the 90-day investment horizon Ford is expected to generate 11.36 times less return on investment than New Sources. But when comparing it to its historical volatility, Ford Motor is 4.08 times less risky than New Sources. It trades about 0.01 of its potential returns per unit of risk. New Sources Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5.24 in New Sources Energy on September 2, 2024 and sell it today you would lose (3.54) from holding New Sources Energy or give up 67.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Ford Motor vs. New Sources Energy
Performance |
| Timeline |
| Ford Motor |
| New Sources Energy |
Ford and New Sources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and New Sources
The main advantage of trading using opposite Ford and New Sources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, New Sources 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 Sources will offset losses from the drop in New Sources' long position.The idea behind Ford Motor and New Sources Energy 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 Sources vs. NedSense Enterprises NV | New Sources vs. Ctac NV | New Sources vs. Lavide Holding NV | New Sources vs. iShares SP 500 |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |