Correlation Between Ford and Yancoal Australia
Can any of the company-specific risk be diversified away by investing in both Ford and Yancoal Australia 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 Yancoal Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Yancoal Australia, you can compare the effects of market volatilities on Ford and Yancoal Australia 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 Yancoal Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Yancoal Australia.
Diversification Opportunities for Ford and Yancoal Australia
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Yancoal is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia 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 Yancoal Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yancoal Australia has no effect on the direction of Ford i.e., Ford and Yancoal Australia go up and down completely randomly.
Pair Corralation between Ford and Yancoal Australia
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.86 times more return on investment than Yancoal Australia. However, Ford Motor is 1.16 times less risky than Yancoal Australia. It trades about 0.18 of its potential returns per unit of risk. Yancoal Australia is currently generating about 0.02 per unit of risk. If you would invest 1,033 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 80.00 from holding Ford Motor or generate 7.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ford Motor vs. Yancoal Australia
Performance |
| Timeline |
| Ford Motor |
| Yancoal Australia |
Ford and Yancoal Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Yancoal Australia
The main advantage of trading using opposite Ford and Yancoal Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Yancoal Australia 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 Yancoal Australia will offset losses from the drop in Yancoal Australia's long position.The idea behind Ford Motor and Yancoal Australia 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.| Yancoal Australia vs. Thungela Resources Limited | Yancoal Australia vs. Whitehaven Coal Limited | Yancoal Australia vs. Bukit Asam Tbk | Yancoal Australia vs. Indo Tambangraya Megah |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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