Correlation Between Ford and Capitan Mining

Can any of the company-specific risk be diversified away by investing in both Ford and Capitan 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 Capitan 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 Capitan Mining, you can compare the effects of market volatilities on Ford and Capitan 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 Capitan Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Capitan Mining.

Diversification Opportunities for Ford and Capitan Mining

0.22

Correlation Coefficient

Ford  Capitan Mining

Modest diversification

The 3 months correlation between Ford and Capitan is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Capitan Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitan 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 Capitan Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitan Mining has no effect on the direction of Ford i.e., Ford and Capitan Mining go up and down completely randomly.

Pair Corralation between Ford and Capitan Mining

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Capitan Mining. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 3.61 times less risky than Capitan Mining. The stock trades about -0.02 of its potential returns per unit of risk. The Capitan Mining is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Capitan Mining on September 30, 2024 and sell it today you would earn a total of  12.00  from holding Capitan Mining or generate 80.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Ford Motor  vs.  Capitan Mining

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 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.

Capitan Mining

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capitan Mining are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Capitan Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Capitan Mining

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

The idea behind Ford Motor and Capitan Mining 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.