Correlation Between Ford and Eastern Platinum

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

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

Diversification Opportunities for Ford and Eastern Platinum

-0.01

Correlation Coefficient

Ford  Eastern Platinum

Good diversification

The 3 months correlation between Ford and Eastern is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Eastern Platinum Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Platinum 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 Eastern Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Platinum has no effect on the direction of Ford i.e., Ford and Eastern Platinum go up and down completely randomly.

Pair Corralation between Ford and Eastern Platinum

Taking into account the 90-day investment horizon Ford is expected to generate 4.99 times less return on investment than Eastern Platinum. But when comparing it to its historical volatility, Ford Motor is 2.9 times less risky than Eastern Platinum. It trades about 0.04 of its potential returns per unit of risk. Eastern Platinum Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Eastern Platinum Limited on December 28, 2024 and sell it today you would earn a total of  2.00  from holding Eastern Platinum Limited or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Ford Motor  vs.  Eastern Platinum Limited

Ford Motor

Risk-Adjusted Performance

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.

Eastern Platinum

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Platinum Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Eastern Platinum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Eastern Platinum

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

The idea behind Ford Motor and Eastern Platinum Limited 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.