Correlation Between Ford and NuVista Energy
Can any of the company-specific risk be diversified away by investing in both Ford and NuVista Energy 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 NuVista Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and NuVista Energy, you can compare the effects of market volatilities on Ford and NuVista Energy 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 NuVista Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and NuVista Energy.
Diversification Opportunities for Ford and NuVista Energy
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and NuVista is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and NuVista Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuVista 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 NuVista Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuVista Energy has no effect on the direction of Ford i.e., Ford and NuVista Energy go up and down completely randomly.
Pair Corralation between Ford and NuVista Energy
Taking into account the 90-day investment horizon Ford is expected to generate 2.52 times less return on investment than NuVista Energy. But when comparing it to its historical volatility, Ford Motor is 1.23 times less risky than NuVista Energy. It trades about 0.17 of its potential returns per unit of risk. NuVista Energy is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,122 in NuVista Energy on August 31, 2024 and sell it today you would earn a total of 228.00 from holding NuVista Energy or generate 20.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. NuVista Energy
Performance |
| Timeline |
| Ford Motor |
| NuVista Energy |
Ford and NuVista Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and NuVista Energy
The main advantage of trading using opposite Ford and NuVista Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, NuVista Energy 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 NuVista Energy will offset losses from the drop in NuVista Energy's long position.The idea behind Ford Motor and NuVista 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.| NuVista Energy vs. Tamarack Valley Energy | NuVista Energy vs. Birchcliff Energy | NuVista Energy vs. MEG Energy Corp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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