Correlation Between Ford and ProAm Explorations

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

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

Diversification Opportunities for Ford and ProAm Explorations

0.31

Correlation Coefficient

Ford  ProAm Explorations

Weak diversification

The 3 months correlation between Ford and ProAm is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ProAm Explorations Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProAm Explorations 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 ProAm Explorations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProAm Explorations Corp has no effect on the direction of Ford i.e., Ford and ProAm Explorations go up and down completely randomly.

Pair Corralation between Ford and ProAm Explorations

Taking into account the 90-day investment horizon Ford is expected to generate 199.54 times less return on investment than ProAm Explorations. But when comparing it to its historical volatility, Ford Motor is 7.4 times less risky than ProAm Explorations. It trades about 0.0 of its potential returns per unit of risk. ProAm Explorations Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4.00  in ProAm Explorations Corp on October 25, 2024 and sell it today you would earn a total of  0.00  from holding ProAm Explorations Corp or generate 0.0% return on investment over 90 days.

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

Ford Motor  vs.  ProAm Explorations 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.

ProAm Explorations Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProAm Explorations Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Ford and ProAm Explorations

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

The idea behind Ford Motor and ProAm Explorations 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.