Correlation Between Ford and Triumph
Can any of the company-specific risk be diversified away by investing in both Ford and Triumph 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 Triumph into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Triumph Group, you can compare the effects of market volatilities on Ford and Triumph 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 Triumph. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Triumph.
Diversification Opportunities for Ford and Triumph
Good diversification
The 3 months correlation between Ford and Triumph is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Triumph Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triumph Group 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 Triumph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triumph Group has no effect on the direction of Ford i.e., Ford and Triumph go up and down completely randomly.
Pair Corralation between Ford and Triumph
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.1 times more return on investment than Triumph. However, Ford is 2.1 times more volatile than Triumph Group. It trades about 0.13 of its potential returns per unit of risk. Triumph Group is currently generating about 0.17 per unit of risk. If you would invest 965.00 in Ford Motor on November 3, 2024 and sell it today you would earn a total of 43.00 from holding Ford Motor or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Triumph Group
Performance |
| Timeline |
| Ford Motor |
| Triumph Group |
Ford and Triumph Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Triumph
The main advantage of trading using opposite Ford and Triumph positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Triumph 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 Triumph will offset losses from the drop in Triumph's long position.The idea behind Ford Motor and Triumph Group 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.| Triumph vs. Mercury Systems | Triumph vs. Curtiss Wright | Triumph vs. Hexcel | Triumph vs. Ducommun Incorporated |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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