Correlation Between Ford and Theratechnologies
Can any of the company-specific risk be diversified away by investing in both Ford and Theratechnologies 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 Theratechnologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Theratechnologies, you can compare the effects of market volatilities on Ford and Theratechnologies 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 Theratechnologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Theratechnologies.
Diversification Opportunities for Ford and Theratechnologies
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and Theratechnologies is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Theratechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Theratechnologies 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 Theratechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Theratechnologies has no effect on the direction of Ford i.e., Ford and Theratechnologies go up and down completely randomly.
Pair Corralation between Ford and Theratechnologies
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.97 times more return on investment than Theratechnologies. However, Ford Motor is 1.03 times less risky than Theratechnologies. It trades about 0.0 of its potential returns per unit of risk. Theratechnologies is currently generating about -0.08 per unit of risk. If you would invest 1,091 in Ford Motor on August 24, 2024 and sell it today you would lose (11.00) from holding Ford Motor or give up 1.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Theratechnologies
Performance |
| Timeline |
| Ford Motor |
| Theratechnologies |
Ford and Theratechnologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Theratechnologies
The main advantage of trading using opposite Ford and Theratechnologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Theratechnologies 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 Theratechnologies will offset losses from the drop in Theratechnologies' long position.The idea behind Ford Motor and Theratechnologies 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.| Theratechnologies vs. Opthea | Theratechnologies vs. Centessa Pharmaceuticals PLC | Theratechnologies vs. Nuvalent | Theratechnologies vs. Tarsus Pharmaceuticals |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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