Correlation Between Vertex Energy and Ford

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

Diversification Opportunities for Vertex Energy and Ford

0.07
  Correlation Coefficient

Significant diversification

The 3 months correlation between Vertex and Ford is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Vertex Energy and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Vertex Energy 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 Vertex Energy are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Vertex Energy i.e., Vertex Energy and Ford go up and down completely randomly.

Pair Corralation between Vertex Energy and Ford

Given the investment horizon of 90 days Vertex Energy is expected to generate 2.46 times more return on investment than Ford. However, Vertex Energy is 2.46 times more volatile than Ford Motor. It trades about 0.01 of its potential returns per unit of risk. Ford Motor is currently generating about 0.01 per unit of risk. If you would invest  864.00  in Vertex Energy on May 17, 2022 and sell it today you would lose (166.00)  from holding Vertex Energy or give up 19.21% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Vertex Energy  vs.  Ford Motor

 Performance (%) 
       Timeline  
Vertex Energy 
Vertex Performance
0 of 100
Over the last 90 days Vertex Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in September 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Vertex Price Channel

Ford Motor 
Ford Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain 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 and Ford Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vertex Energy and Ford

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

Vertex Energy

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Vertex Energy as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Vertex Energy's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Vertex Energy's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Vertex Energy.
The idea behind Vertex Energy and Ford Motor 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.
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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