Correlation Between Ford and Faraday Copper

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

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

Diversification Opportunities for Ford and Faraday Copper

0.21

Correlation Coefficient

Ford  Faraday Copper

Modest diversification

The 3 months correlation between Ford and Faraday is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Faraday Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Copper 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 Faraday Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Copper Corp has no effect on the direction of Ford i.e., Ford and Faraday Copper go up and down completely randomly.

Pair Corralation between Ford and Faraday Copper

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.32 times more return on investment than Faraday Copper. However, Ford is 1.32 times more volatile than Faraday Copper Corp. It trades about 0.04 of its potential returns per unit of risk. Faraday Copper Corp is currently generating about -0.07 per unit of risk. If you would invest  1,122  in Ford Motor on August 28, 2024 and sell it today you would earn a total of  18.00  from holding Ford Motor or generate 1.6% 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.  Faraday Copper Corp

Ford Motor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 3 (%) 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.

Faraday Copper Corp

Risk-Adjusted Performance

10 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Faraday Copper Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Faraday Copper displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Faraday Copper

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

The idea behind Ford Motor and Faraday Copper 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.