Correlation Between Ford and Pure Energy
Can any of the company-specific risk be diversified away by investing in both Ford and Pure 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 Pure 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 Pure Energy Minerals, you can compare the effects of market volatilities on Ford and Pure 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 Pure Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Pure Energy.
Diversification Opportunities for Ford and Pure Energy
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Pure is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Pure Energy Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Energy Minerals 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 Pure Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Energy Minerals has no effect on the direction of Ford i.e., Ford and Pure Energy go up and down completely randomly.
Pair Corralation between Ford and Pure Energy
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.33 times more return on investment than Pure Energy. However, Ford Motor is 3.07 times less risky than Pure Energy. It trades about 0.23 of its potential returns per unit of risk. Pure Energy Minerals is currently generating about -0.04 per unit of risk. If you would invest 1,015 in Ford Motor on September 1, 2024 and sell it today you would earn a total of 98.00 from holding Ford Motor or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Pure Energy Minerals
Performance |
| Timeline |
| Ford Motor |
| Pure Energy Minerals |
Ford and Pure Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Pure Energy
The main advantage of trading using opposite Ford and Pure Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Pure 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 Pure Energy will offset losses from the drop in Pure Energy's long position.The idea behind Ford Motor and Pure Energy Minerals 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.| Pure Energy vs. ATT Inc | Pure Energy vs. Merck Company | Pure Energy vs. Walt Disney | Pure Energy vs. Caterpillar |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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