Correlation Between Ford and Gmo Resources

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

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

Diversification Opportunities for Ford and Gmo Resources

0.58

Correlation Coefficient

Ford  Gmo Resources

Very weak diversification

The 3 months correlation between Ford and Gmo is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Gmo Resources Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Resources 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 Gmo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Resources has no effect on the direction of Ford i.e., Ford and Gmo Resources go up and down completely randomly.

Pair Corralation between Ford and Gmo Resources

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Gmo Resources. In addition to that, Ford is 1.13 times more volatile than Gmo Resources Fund. It trades about -0.22 of its total potential returns per unit of risk. Gmo Resources Fund is currently generating about -0.08 per unit of volatility. If you would invest  2,000  in Gmo Resources Fund on October 11, 2024 and sell it today you would lose (90.00) from holding Gmo Resources Fund or give up 4.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

Ford Motor  vs.  Gmo Resources Fund

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 unfluctuating 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.

Gmo Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Resources Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Ford and Gmo Resources

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

The idea behind Ford Motor and Gmo Resources Fund 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.