Correlation Between Ford and Sarama Resource
Can any of the company-specific risk be diversified away by investing in both Ford and Sarama Resource 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 Sarama Resource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Sarama Resource, you can compare the effects of market volatilities on Ford and Sarama Resource 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 Sarama Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Sarama Resource.
Diversification Opportunities for Ford and Sarama Resource
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Sarama is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sarama Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarama Resource 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 Sarama Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarama Resource has no effect on the direction of Ford i.e., Ford and Sarama Resource go up and down completely randomly.
Pair Corralation between Ford and Sarama Resource
Taking into account the 90-day investment horizon Ford is expected to generate 40.37 times less return on investment than Sarama Resource. But when comparing it to its historical volatility, Ford Motor is 4.38 times less risky than Sarama Resource. It trades about 0.01 of its potential returns per unit of risk. Sarama Resource is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1.50 in Sarama Resource on August 25, 2024 and sell it today you would earn a total of 1.50 from holding Sarama Resource or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Sarama Resource
Performance |
| Timeline |
| Ford Motor |
| Sarama Resource |
Ford and Sarama Resource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Sarama Resource
The main advantage of trading using opposite Ford and Sarama Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Sarama Resource 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 Sarama Resource will offset losses from the drop in Sarama Resource's long position.The idea behind Ford Motor and Sarama Resource 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.| Sarama Resource vs. Thor Explorations | Sarama Resource vs. Highway 50 Gold | Sarama Resource vs. Transatlantic Mining Corp | Sarama Resource vs. Finlay Minerals |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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