Correlation Between Ford and Platinum Group
Can any of the company-specific risk be diversified away by investing in both Ford and Platinum Group 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 Platinum Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Platinum Group Metals, you can compare the effects of market volatilities on Ford and Platinum Group 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 Platinum Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Platinum Group.
Diversification Opportunities for Ford and Platinum Group
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Platinum is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Platinum Group Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Group Metals 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 Platinum Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Group Metals has no effect on the direction of Ford i.e., Ford and Platinum Group go up and down completely randomly.
Pair Corralation between Ford and Platinum Group
Taking into account the 90-day investment horizon Ford is expected to generate 2.76 times less return on investment than Platinum Group. But when comparing it to its historical volatility, Ford Motor is 1.85 times less risky than Platinum Group. It trades about 0.01 of its potential returns per unit of risk. Platinum Group Metals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 228.00 in Platinum Group Metals on August 29, 2024 and sell it today you would lose (3.00) from holding Platinum Group Metals or give up 1.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.75% |
| Values | Daily Returns |
Ford Motor vs. Platinum Group Metals
Performance |
| Timeline |
| Ford Motor |
| Platinum Group Metals |
Ford and Platinum Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Platinum Group
The main advantage of trading using opposite Ford and Platinum Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Platinum Group 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 Platinum Group will offset losses from the drop in Platinum Group's long position.The idea behind Ford Motor and Platinum Group Metals 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.| Platinum Group vs. Eastern Platinum Limited | Platinum Group vs. Entree Resources | Platinum Group vs. Solitario Exploration Royalty | Platinum Group vs. Minco Silver |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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