Correlation Between Ford and Generation Mining

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

Diversification Opportunities for Ford and Generation Mining

0.15

Correlation Coefficient

Ford  Generation Mining

Average diversification

The 3 months correlation between Ford and Generation is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Generation Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generation 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 Generation Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generation Mining has no effect on the direction of Ford i.e., Ford and Generation Mining go up and down completely randomly.

Pair Corralation between Ford and Generation Mining

Taking into account the 90-day investment horizon Ford is expected to generate 9.34 times less return on investment than Generation Mining. But when comparing it to its historical volatility, Ford Motor is 3.78 times less risky than Generation Mining. It trades about 0.05 of its potential returns per unit of risk. Generation Mining is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Generation Mining on December 21, 2024 and sell it today you would earn a total of  6.00  from holding Generation Mining or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Ford Motor  vs.  Generation Mining

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 3 (%) 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.

Generation Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Generation Mining are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Generation Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Generation Mining

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

The idea behind Ford Motor and Generation 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.