Correlation Between Ford and Elemental Royalties

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

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

Diversification Opportunities for Ford and Elemental Royalties

-0.24

Correlation Coefficient

Ford  Elemental Royalties

Very good diversification

The 3 months correlation between Ford and Elemental is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Elemental Royalties Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elemental Royalties 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 Elemental Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elemental Royalties Corp has no effect on the direction of Ford i.e., Ford and Elemental Royalties go up and down completely randomly.

Pair Corralation between Ford and Elemental Royalties

Taking into account the 90-day investment horizon Ford is expected to generate 3.34 times less return on investment than Elemental Royalties. But when comparing it to its historical volatility, Ford Motor is 1.34 times less risky than Elemental Royalties. It trades about 0.02 of its potential returns per unit of risk. Elemental Royalties Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  75.00  in Elemental Royalties Corp on September 4, 2024 and sell it today you would earn a total of  6.00  from holding Elemental Royalties Corp or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Ford Motor  vs.  Elemental Royalties Corp

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Elemental Royalties Corp

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Ford and Elemental Royalties

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

The idea behind Ford Motor and Elemental Royalties 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.