Correlation Between Carbon Revolution and Ford

Can any of the company-specific risk be diversified away by investing in both Carbon Revolution and Ford 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 Carbon Revolution and Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carbon Revolution Public and Ford Motor, you can compare the effects of market volatilities on Carbon Revolution and Ford 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 Carbon Revolution with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carbon Revolution and Ford.

Diversification Opportunities for Carbon Revolution and Ford

0.03

Correlation Coefficient

Carbon Revolution  Ford

Significant diversification

The 3 months correlation between Carbon and Ford is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Carbon Revolution Public and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Carbon Revolution 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 Carbon Revolution Public are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Carbon Revolution i.e., Carbon Revolution and Ford go up and down completely randomly.

Pair Corralation between Carbon Revolution and Ford

Assuming the 90 days horizon Carbon Revolution Public is expected to generate 6.74 times more return on investment than Ford. However, Carbon Revolution is 6.74 times more volatile than Ford Motor. It trades about 0.09 of its potential returns per unit of risk. Ford Motor is currently generating about -0.1 per unit of risk. If you would invest  2.54  in Carbon Revolution Public on September 22, 2024 and sell it today you would earn a total of  0.24  from holding Carbon Revolution Public or generate 9.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	72.09%
Values	Daily Returns

Carbon Revolution Public  vs.  Ford Motor

Carbon Revolution Public

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carbon Revolution Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Carbon Revolution showed solid returns over the last few months and may actually be approaching a breakup point.

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Carbon Revolution and Ford

The main advantage of trading using opposite Carbon Revolution and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carbon Revolution position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.

The idea behind Carbon Revolution Public and Ford Motor 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.

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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 Stocks Directory module to find actively traded stocks across global markets.