Correlation Between Ford and Power Metal
Can any of the company-specific risk be diversified away by investing in both Ford and Power Metal 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 Power Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Power Metal Resources, you can compare the effects of market volatilities on Ford and Power Metal 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 Power Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Power Metal.
Diversification Opportunities for Ford and Power Metal
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Power is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Power Metal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metal 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 Power Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metal Resources has no effect on the direction of Ford i.e., Ford and Power Metal go up and down completely randomly.
Pair Corralation between Ford and Power Metal
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.56 times more return on investment than Power Metal. However, Ford Motor is 1.78 times less risky than Power Metal. It trades about 0.13 of its potential returns per unit of risk. Power Metal Resources is currently generating about -0.1 per unit of risk. If you would invest 965.00 in Ford Motor on November 3, 2024 and sell it today you would earn a total of 43.00 from holding Ford Motor or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Ford Motor vs. Power Metal Resources
Performance |
| Timeline |
| Ford Motor |
| Power Metal Resources |
Ford and Power Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Power Metal
The main advantage of trading using opposite Ford and Power Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Power Metal 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 Power Metal will offset losses from the drop in Power Metal's long position.The idea behind Ford Motor and Power Metal 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.| Power Metal vs. American Homes 4 | Power Metal vs. Universal Music Group | Power Metal vs. Applied Materials | Power Metal vs. Cairo Communication SpA |
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 Positions Ratings module to 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.
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