Correlation Between Ford and West Vault

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

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

Diversification Opportunities for Ford and West Vault

-0.3

Correlation Coefficient

Ford  West Vault

Very good diversification

The 3 months correlation between Ford and West is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and West Vault Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Vault Mining 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 West Vault. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Vault Mining has no effect on the direction of Ford i.e., Ford and West Vault go up and down completely randomly.

Pair Corralation between Ford and West Vault

Taking into account the 90-day investment horizon Ford is expected to generate 3.07 times less return on investment than West Vault. But when comparing it to its historical volatility, Ford Motor is 2.45 times less risky than West Vault. It trades about 0.06 of its potential returns per unit of risk. West Vault Mining is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  66.00  in West Vault Mining on December 18, 2024 and sell it today you would earn a total of  10.00  from holding West Vault Mining or generate 15.15% return on investment over 90 days.

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

Ford Motor  vs.  West Vault Mining

Ford Motor

Risk-Adjusted Performance

Weak

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.

West Vault Mining

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in West Vault Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, West Vault reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and West Vault

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

The idea behind Ford Motor and West Vault Mining 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.