Correlation Between Ford and Vertex Energy

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Can any of the company-specific risk be diversified away by investing in both Ford and Vertex Energy 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 Vertex Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Vertex Energy, you can compare the effects of market volatilities on Ford and Vertex Energy 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 Vertex Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Vertex Energy.

Diversification Opportunities for Ford and Vertex Energy

0.38
  Correlation Coefficient

Weak diversification

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

Pair Corralation between Ford and Vertex Energy

Taking into account the 90-day investment horizon Ford is expected to generate 4.35 times less return on investment than Vertex Energy. But when comparing it to its historical volatility, Ford Motor is 3.58 times less risky than Vertex Energy. It trades about 0.07 of its potential returns per unit of risk. Vertex Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Vertex Energy on May 11, 2022 and sell it today you would earn a total of  676.00  from holding Vertex Energy or generate 994.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Vertex Energy

 Performance (%) 
       Timeline  
Ford Motor 
Ford Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish technical and fundamental indicators, Ford exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ford Price Channel

Vertex Energy 
Vertex Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Vertex Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Vertex Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Vertex Price Channel

Ford and Vertex Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Vertex Energy

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

Vertex Energy

Pair trading matchups for Vertex Energy

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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