Correlation Between Ford and TTFB
Can any of the company-specific risk be diversified away by investing in both Ford and TTFB 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 TTFB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and TTFB Co, you can compare the effects of market volatilities on Ford and TTFB 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 TTFB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and TTFB.
Diversification Opportunities for Ford and TTFB
Average diversification
The 3 months correlation between Ford and TTFB is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and TTFB Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTFB 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 TTFB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTFB has no effect on the direction of Ford i.e., Ford and TTFB go up and down completely randomly.
Pair Corralation between Ford and TTFB
Taking into account the 90-day investment horizon Ford is expected to generate 79.62 times less return on investment than TTFB. But when comparing it to its historical volatility, Ford Motor is 20.01 times less risky than TTFB. It trades about 0.01 of its potential returns per unit of risk. TTFB Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 15,066 in TTFB Co on August 24, 2024 and sell it today you would earn a total of 5,034 from holding TTFB Co or generate 33.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.57% |
| Values | Daily Returns |
Ford Motor vs. TTFB Co
Performance |
| Timeline |
| Ford Motor |
| TTFB |
Ford and TTFB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and TTFB
The main advantage of trading using opposite Ford and TTFB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, TTFB 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 TTFB will offset losses from the drop in TTFB's long position.The idea behind Ford Motor and TTFB Co 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.| TTFB vs. Wowprime Corp | TTFB vs. Gourmet Master Co | TTFB vs. President Chain Store | TTFB vs. La Kaffa International |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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