Correlation Between Ford and Revival Gold

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

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

Diversification Opportunities for Ford and Revival Gold

0.08

Correlation Coefficient

Ford  Revival Gold

Significant diversification

The 3 months correlation between Ford and Revival is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Revival Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revival Gold 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 Revival Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revival Gold has no effect on the direction of Ford i.e., Ford and Revival Gold go up and down completely randomly.

Pair Corralation between Ford and Revival Gold

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Revival Gold. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.68 times less risky than Revival Gold. The stock trades about -0.01 of its potential returns per unit of risk. The Revival Gold is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Revival Gold on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Revival Gold or generate 0.0% return on investment over 90 days.

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

Ford Motor  vs.  Revival Gold

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Revival Gold

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ford and Revival Gold

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

The idea behind Ford Motor and Revival Gold 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.