Correlation Between Ford and Fosterville South

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

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

Diversification Opportunities for Ford and Fosterville South

-0.23

Correlation Coefficient

Ford  Fosterville South

Very good diversification

The 3 months correlation between Ford and Fosterville is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fosterville South Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fosterville South 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 Fosterville South. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fosterville South has no effect on the direction of Ford i.e., Ford and Fosterville South go up and down completely randomly.

Pair Corralation between Ford and Fosterville South

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Fosterville South. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 2.75 times less risky than Fosterville South. The stock trades about -0.18 of its potential returns per unit of risk. The Fosterville South Exploration is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Fosterville South Exploration on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Fosterville South Exploration or generate 0.0% 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.  Fosterville South Exploration

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.

Fosterville South

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fosterville South Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ford and Fosterville South

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

The idea behind Ford Motor and Fosterville South Exploration 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.