Correlation Between Ford and Mammoth Resources

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

Diversification Opportunities for Ford and Mammoth Resources

0.27

Correlation Coefficient

Ford  Mammoth Resources

Modest diversification

The 3 months correlation between Ford and Mammoth is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mammoth Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mammoth Resources Corp 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 Mammoth Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mammoth Resources Corp has no effect on the direction of Ford i.e., Ford and Mammoth Resources go up and down completely randomly.

Pair Corralation between Ford and Mammoth Resources

Taking into account the 90-day investment horizon Ford is expected to generate 81.29 times less return on investment than Mammoth Resources. But when comparing it to its historical volatility, Ford Motor is 6.26 times less risky than Mammoth Resources. It trades about 0.0 of its potential returns per unit of risk. Mammoth Resources Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Mammoth Resources Corp on October 4, 2024 and sell it today you would lose (2.50) from holding Mammoth Resources Corp or give up 62.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Mammoth Resources Corp

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 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.

Mammoth Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mammoth Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mammoth Resources is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ford and Mammoth Resources

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

The idea behind Ford Motor and Mammoth Resources Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.