Correlation Between Ford and Hammer Metals

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

Diversification Opportunities for Ford and Hammer Metals

-0.13

Correlation Coefficient

Ford  Hammer Metals

Good diversification

The 3 months correlation between Ford and Hammer is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hammer Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammer 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 Hammer Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammer Metals has no effect on the direction of Ford i.e., Ford and Hammer Metals go up and down completely randomly.

Pair Corralation between Ford and Hammer Metals

Taking into account the 90-day investment horizon Ford is expected to generate 1.29 times less return on investment than Hammer Metals. But when comparing it to its historical volatility, Ford Motor is 2.14 times less risky than Hammer Metals. It trades about 0.06 of its potential returns per unit of risk. Hammer Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3.10  in Hammer Metals on December 19, 2024 and sell it today you would earn a total of  0.10  from holding Hammer Metals or generate 3.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Ford Motor  vs.  Hammer Metals

Ford Motor

Risk-Adjusted Performance

Insignificant

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

Hammer Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hammer Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hammer Metals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ford and Hammer Metals

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

The idea behind Ford Motor and Hammer 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.