Correlation Between Ford and POWR Lithium
Can any of the company-specific risk be diversified away by investing in both Ford and POWR Lithium 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 POWR Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and POWR Lithium Corp, you can compare the effects of market volatilities on Ford and POWR Lithium 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 POWR Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and POWR Lithium.
Diversification Opportunities for Ford and POWR Lithium
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and POWR is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and POWR Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POWR Lithium 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 POWR Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POWR Lithium Corp has no effect on the direction of Ford i.e., Ford and POWR Lithium go up and down completely randomly.
Pair Corralation between Ford and POWR Lithium
Taking into account the 90-day investment horizon Ford is expected to generate 50.76 times less return on investment than POWR Lithium. But when comparing it to its historical volatility, Ford Motor is 14.22 times less risky than POWR Lithium. It trades about 0.02 of its potential returns per unit of risk. POWR Lithium Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 10.00 in POWR Lithium Corp on September 6, 2024 and sell it today you would lose (4.10) from holding POWR Lithium Corp or give up 41.0% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Ford Motor vs. POWR Lithium Corp
Performance |
Timeline |
Ford Motor |
POWR Lithium Corp |
Ford and POWR Lithium Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and POWR Lithium
The main advantage of trading using opposite Ford and POWR Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, POWR Lithium 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 POWR Lithium will offset losses from the drop in POWR Lithium's long position.The idea behind Ford Motor and POWR Lithium 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.POWR Lithium vs. Sanyo Special Steel | POWR Lithium vs. Insteel Industries | POWR Lithium vs. Valneva SE ADR | POWR Lithium vs. BioNTech SE |
Check out your portfolio center.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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