Correlation Between Ford and Caravel Minerals

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

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

Diversification Opportunities for Ford and Caravel Minerals

-0.32

Correlation Coefficient

Ford  Caravel Minerals

Very good diversification

The 3 months correlation between Ford and Caravel is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Caravel Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caravel Minerals 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 Caravel Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caravel Minerals has no effect on the direction of Ford i.e., Ford and Caravel Minerals go up and down completely randomly.

Pair Corralation between Ford and Caravel Minerals

Taking into account the 90-day investment horizon Ford is expected to generate 7.91 times less return on investment than Caravel Minerals. But when comparing it to its historical volatility, Ford Motor is 2.4 times less risky than Caravel Minerals. It trades about 0.0 of its potential returns per unit of risk. Caravel Minerals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Caravel Minerals on October 11, 2024 and sell it today you would lose (6.00) from holding Caravel Minerals or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Ford Motor  vs.  Caravel Minerals

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 abnormal 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.

Caravel Minerals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Caravel Minerals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caravel Minerals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ford and Caravel Minerals

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

The idea behind Ford Motor and Caravel Minerals 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.