Correlation Between Ford and Sprott Junior
Can any of the company-specific risk be diversified away by investing in both Ford and Sprott Junior 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 Sprott Junior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Sprott Junior Gold, you can compare the effects of market volatilities on Ford and Sprott Junior 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 Sprott Junior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Sprott Junior.
Diversification Opportunities for Ford and Sprott Junior
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Sprott is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sprott Junior Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Junior Gold 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 Sprott Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Junior Gold has no effect on the direction of Ford i.e., Ford and Sprott Junior go up and down completely randomly.
Pair Corralation between Ford and Sprott Junior
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.94 times more return on investment than Sprott Junior. However, Ford Motor is 1.07 times less risky than Sprott Junior. It trades about 0.18 of its potential returns per unit of risk. Sprott Junior Gold is currently generating about -0.2 per unit of risk. If you would invest 1,027 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 83.00 from holding Ford Motor or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Sprott Junior Gold
Performance |
| Timeline |
| Ford Motor |
| Sprott Junior Gold |
Ford and Sprott Junior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Sprott Junior
The main advantage of trading using opposite Ford and Sprott Junior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Sprott Junior 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 Sprott Junior will offset losses from the drop in Sprott Junior's long position.The idea behind Ford Motor and Sprott Junior Gold 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.| Sprott Junior vs. Sprott Gold Miners | Sprott Junior vs. Amplify ETF Trust | Sprott Junior vs. US Global GO | Sprott Junior vs. Global X Gold |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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