Correlation Between Ford and Texas Capital
Can any of the company-specific risk be diversified away by investing in both Ford and Texas Capital 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 Texas Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Texas Capital Bancshares, you can compare the effects of market volatilities on Ford and Texas Capital 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 Texas Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Texas Capital.
Diversification Opportunities for Ford and Texas Capital
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Texas is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Texas Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Bancshares 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 Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Bancshares has no effect on the direction of Ford i.e., Ford and Texas Capital go up and down completely randomly.
Pair Corralation between Ford and Texas Capital
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Texas Capital. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.07 times less risky than Texas Capital. The stock trades about 0.0 of its potential returns per unit of risk. The Texas Capital Bancshares is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 7,745 in Texas Capital Bancshares on August 24, 2024 and sell it today you would earn a total of 763.00 from holding Texas Capital Bancshares or generate 9.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Texas Capital Bancshares
Performance |
| Timeline |
| Ford Motor |
| Texas Capital Bancshares |
Ford and Texas Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Texas Capital
The main advantage of trading using opposite Ford and Texas Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Texas Capital 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 Texas Capital will offset losses from the drop in Texas Capital's long position.The idea behind Ford Motor and Texas Capital Bancshares 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.| Texas Capital vs. Heartland Financial USA | Texas Capital vs. Heritage Commerce Corp | Texas Capital vs. Business First Bancshares | Texas Capital vs. German American Bancorp |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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