Correlation Between Ford and Athabasca Oil

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

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

Diversification Opportunities for Ford and Athabasca Oil

0.3

Correlation Coefficient

Ford  Athabasca Oil

Weak diversification

The 3 months correlation between Ford and Athabasca is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Athabasca Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Athabasca Oil Corp 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 Athabasca Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Athabasca Oil Corp has no effect on the direction of Ford i.e., Ford and Athabasca Oil go up and down completely randomly.

Pair Corralation between Ford and Athabasca Oil

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Athabasca Oil. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.0 times less risky than Athabasca Oil. The stock trades about 0.0 of its potential returns per unit of risk. The Athabasca Oil Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  295.00  in Athabasca Oil Corp on September 1, 2024 and sell it today you would earn a total of  219.00  from holding Athabasca Oil Corp or generate 74.24% 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.  Athabasca Oil Corp

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Athabasca Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Athabasca Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Athabasca Oil is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Athabasca Oil

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

The idea behind Ford Motor and Athabasca Oil Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.