Correlation Between Ford and Western Mining

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

By analyzing existing cross correlation between Ford Motor and Western Mining Co, you can compare the effects of market volatilities on Ford and Western Mining 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 Western Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Western Mining.

Diversification Opportunities for Ford and Western Mining

0.36

Correlation Coefficient

Ford  Western Mining

Weak diversification

The 3 months correlation between Ford and Western is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Western Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Mining 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 Western Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Mining has no effect on the direction of Ford i.e., Ford and Western Mining go up and down completely randomly.

Pair Corralation between Ford and Western Mining

Taking into account the 90-day investment horizon Ford is expected to generate 1.63 times less return on investment than Western Mining. In addition to that, Ford is 1.33 times more volatile than Western Mining Co. It trades about 0.05 of its total potential returns per unit of risk. Western Mining Co is currently generating about 0.12 per unit of volatility. If you would invest  1,641  in Western Mining Co on December 26, 2024 and sell it today you would earn a total of  168.00  from holding Western Mining Co or generate 10.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.08%
Values	Daily Returns

Ford Motor  vs.  Western Mining Co

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Western Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Mining Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Western Mining may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ford and Western Mining

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

The idea behind Ford Motor and Western Mining Co 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.