Correlation Between Ford and TLGY Acquisition
Can any of the company-specific risk be diversified away by investing in both Ford and TLGY Acquisition 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 TLGY Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and TLGY Acquisition Corp, you can compare the effects of market volatilities on Ford and TLGY Acquisition 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 TLGY Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and TLGY Acquisition.
Diversification Opportunities for Ford and TLGY Acquisition
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and TLGY is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and TLGY Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TLGY Acquisition Corp 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 TLGY Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TLGY Acquisition Corp has no effect on the direction of Ford i.e., Ford and TLGY Acquisition go up and down completely randomly.
Pair Corralation between Ford and TLGY Acquisition
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.5 times more return on investment than TLGY Acquisition. However, Ford is 1.5 times more volatile than TLGY Acquisition Corp. It trades about 0.04 of its potential returns per unit of risk. TLGY Acquisition Corp is currently generating about 0.02 per unit of risk. If you would invest 911.00 in Ford Motor on August 26, 2024 and sell it today you would earn a total of 207.00 from holding Ford Motor or generate 22.72% 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. TLGY Acquisition Corp
Performance |
| Timeline |
| Ford Motor |
| TLGY Acquisition Corp |
Ford and TLGY Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and TLGY Acquisition
The main advantage of trading using opposite Ford and TLGY Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, TLGY Acquisition 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 TLGY Acquisition will offset losses from the drop in TLGY Acquisition's long position.The idea behind Ford Motor and TLGY Acquisition Corp 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.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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