Correlation Between Ford and Touchstone Large
Can any of the company-specific risk be diversified away by investing in both Ford and Touchstone Large 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 Touchstone Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Touchstone Large Cap, you can compare the effects of market volatilities on Ford and Touchstone Large 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 Touchstone Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Touchstone Large.
Diversification Opportunities for Ford and Touchstone Large
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ford and Touchstone is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Touchstone Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Large Cap 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 Touchstone Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Large Cap has no effect on the direction of Ford i.e., Ford and Touchstone Large go up and down completely randomly.
Pair Corralation between Ford and Touchstone Large
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Touchstone Large. In addition to that, Ford is 1.89 times more volatile than Touchstone Large Cap. It trades about -0.22 of its total potential returns per unit of risk. Touchstone Large Cap is currently generating about -0.3 per unit of volatility. If you would invest 2,029 in Touchstone Large Cap on October 12, 2024 and sell it today you would lose (95.00) from holding Touchstone Large Cap or give up 4.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Touchstone Large Cap
Performance |
| Timeline |
| Ford Motor |
| Touchstone Large Cap |
Ford and Touchstone Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Touchstone Large
The main advantage of trading using opposite Ford and Touchstone Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Touchstone Large 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 Touchstone Large will offset losses from the drop in Touchstone Large's long position.The idea behind Ford Motor and Touchstone Large Cap 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.| Touchstone Large vs. Schwab Government Money | Touchstone Large vs. Prudential Government Money | Touchstone Large vs. American Funds Government | Touchstone Large vs. Nationwide Government Bond |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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