Correlation Between Ford and Thor Industries
Can any of the company-specific risk be diversified away by investing in both Ford and Thor Industries 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 Thor Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Thor Industries, you can compare the effects of market volatilities on Ford and Thor Industries 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 Thor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Thor Industries.
Diversification Opportunities for Ford and Thor Industries
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Thor is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries 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 Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of Ford i.e., Ford and Thor Industries go up and down completely randomly.
Pair Corralation between Ford and Thor Industries
Taking into account the 90-day investment horizon Ford is expected to generate 5.14 times less return on investment than Thor Industries. But when comparing it to its historical volatility, Ford Motor is 1.17 times less risky than Thor Industries. It trades about 0.01 of its potential returns per unit of risk. Thor Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 7,248 in Thor Industries on September 20, 2024 and sell it today you would earn a total of 2,967 from holding Thor Industries or generate 40.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 83.43% |
| Values | Daily Returns |
Ford Motor vs. Thor Industries
Performance |
| Timeline |
| Ford Motor |
| Thor Industries |
Ford and Thor Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Thor Industries
The main advantage of trading using opposite Ford and Thor Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Thor Industries 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 Thor Industries will offset losses from the drop in Thor Industries' long position.The idea behind Ford Motor and Thor Industries 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.| Thor Industries vs. Dalata Hotel Group | Thor Industries vs. bet at home AG | Thor Industries vs. Melia Hotels | Thor Industries vs. Capital Drilling |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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