Correlation Between Ford and Sprott Physical

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

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

Diversification Opportunities for Ford and Sprott Physical

0.09

Correlation Coefficient

Ford  Sprott Physical

Significant diversification

The 3 months correlation between Ford and Sprott is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sprott Physical Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Platinum 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 Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Platinum has no effect on the direction of Ford i.e., Ford and Sprott Physical go up and down completely randomly.

Pair Corralation between Ford and Sprott Physical

Taking into account the 90-day investment horizon Ford is expected to generate 10.06 times less return on investment than Sprott Physical. In addition to that, Ford is 1.27 times more volatile than Sprott Physical Platinum. It trades about 0.01 of its total potential returns per unit of risk. Sprott Physical Platinum is currently generating about 0.13 per unit of volatility. If you would invest  895.00  in Sprott Physical Platinum on February 28, 2024 and sell it today you would earn a total of  111.00  from holding Sprott Physical Platinum or generate 12.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Ford Motor  vs.  Sprott Physical Platinum

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sprott Physical Platinum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Platinum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Sprott Physical may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Ford and Sprott Physical

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

The idea behind Ford Motor and Sprott Physical Platinum 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.