Correlation Between Ford and Leeuwin Metals
Can any of the company-specific risk be diversified away by investing in both Ford and Leeuwin 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 Leeuwin 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 Leeuwin Metals, you can compare the effects of market volatilities on Ford and Leeuwin 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 Leeuwin Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Leeuwin Metals.
Diversification Opportunities for Ford and Leeuwin Metals
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and Leeuwin is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Leeuwin Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leeuwin 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 Leeuwin Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leeuwin Metals has no effect on the direction of Ford i.e., Ford and Leeuwin Metals go up and down completely randomly.
Pair Corralation between Ford and Leeuwin Metals
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Leeuwin Metals. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 6.83 times less risky than Leeuwin Metals. The stock trades about -0.08 of its potential returns per unit of risk. The Leeuwin Metals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 7.00 in Leeuwin Metals on December 3, 2024 and sell it today you would earn a total of 5.00 from holding Leeuwin Metals or generate 71.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Ford Motor vs. Leeuwin Metals
Performance |
Timeline |
Ford Motor |
Leeuwin Metals |
Ford and Leeuwin Metals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Leeuwin Metals
The main advantage of trading using opposite Ford and Leeuwin Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Leeuwin 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 Leeuwin Metals will offset losses from the drop in Leeuwin Metals' long position.The idea behind Ford Motor and Leeuwin 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.Leeuwin Metals vs. Cleanaway Waste Management | Leeuwin Metals vs. Mirrabooka Investments | Leeuwin Metals vs. K2 Asset Management | Leeuwin Metals vs. Pinnacle Investment Management |
Check out your portfolio center.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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