Correlation Between Ford and Catalyst Metals

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

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

Diversification Opportunities for Ford and Catalyst Metals

-0.54

Correlation Coefficient

Ford  Catalyst Metals

Excellent diversification

The 3 months correlation between Ford and Catalyst is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Catalyst Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals 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 Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Ford i.e., Ford and Catalyst Metals go up and down completely randomly.

Pair Corralation between Ford and Catalyst Metals

Taking into account the 90-day investment horizon Ford is expected to generate 189.67 times less return on investment than Catalyst Metals. But when comparing it to its historical volatility, Ford Motor is 2.13 times less risky than Catalyst Metals. It trades about 0.0 of its potential returns per unit of risk. Catalyst Metals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Catalyst Metals on December 4, 2024 and sell it today you would earn a total of  327.00  from holding Catalyst Metals or generate 327.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Ford Motor  vs.  Catalyst Metals

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Catalyst Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Metals are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Catalyst Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Catalyst Metals

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

The idea behind Ford Motor and Catalyst Metals 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.