Correlation Between Ford and Etruscus Resources

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

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

Diversification Opportunities for Ford and Etruscus Resources

0.38

Correlation Coefficient

Ford  Etruscus Resources

Weak diversification

The 3 months correlation between Ford and Etruscus is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Etruscus Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etruscus Resources 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 Etruscus Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etruscus Resources Corp has no effect on the direction of Ford i.e., Ford and Etruscus Resources go up and down completely randomly.

Pair Corralation between Ford and Etruscus Resources

Taking into account the 90-day investment horizon Ford is expected to generate 2.48 times less return on investment than Etruscus Resources. But when comparing it to its historical volatility, Ford Motor is 3.43 times less risky than Etruscus Resources. It trades about 0.01 of its potential returns per unit of risk. Etruscus Resources Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Etruscus Resources Corp on January 20, 2024 and sell it today you would lose (8.82) from holding Etruscus Resources Corp or give up 63.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Etruscus Resources Corp

Ford Motor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 6 (%) 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 May 2024.

Etruscus Resources Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Etruscus Resources Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Etruscus Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Etruscus Resources

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

The idea behind Ford Motor and Etruscus Resources 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.