Correlation Between Ford and TREECOM
Can any of the company-specific risk be diversified away by investing in both Ford and TREECOM 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 TREECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and TREECOM, you can compare the effects of market volatilities on Ford and TREECOM 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 TREECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and TREECOM.
Diversification Opportunities for Ford and TREECOM
Very good diversification
The 3 months correlation between Ford and TREECOM is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and TREECOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TREECOM 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 TREECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TREECOM has no effect on the direction of Ford i.e., Ford and TREECOM go up and down completely randomly.
Pair Corralation between Ford and TREECOM
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.4 times more return on investment than TREECOM. However, Ford Motor is 2.48 times less risky than TREECOM. It trades about -0.21 of its potential returns per unit of risk. TREECOM is currently generating about -0.21 per unit of risk. If you would invest 1,123 in Ford Motor on September 12, 2024 and sell it today you would lose (82.50) from holding Ford Motor or give up 7.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ford Motor vs. TREECOM
Performance |
| Timeline |
| Ford Motor |
| TREECOM |
Ford and TREECOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and TREECOM
The main advantage of trading using opposite Ford and TREECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, TREECOM 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 TREECOM will offset losses from the drop in TREECOM's long position.The idea behind Ford Motor and TREECOM 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.| TREECOM vs. DATAGROUP SE | TREECOM vs. GALENA MINING LTD | TREECOM vs. MINCO SILVER | TREECOM vs. Zijin Mining Group |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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