Correlation Between Ford and Toshiba
Can any of the company-specific risk be diversified away by investing in both Ford and Toshiba 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 Toshiba into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Toshiba, you can compare the effects of market volatilities on Ford and Toshiba 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 Toshiba. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Toshiba.
Diversification Opportunities for Ford and Toshiba
Significant diversification
The 3 months correlation between Ford and Toshiba is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Toshiba in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toshiba 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 Toshiba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toshiba has no effect on the direction of Ford i.e., Ford and Toshiba go up and down completely randomly.
Pair Corralation between Ford and Toshiba
If you would invest 3,251 in Toshiba on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Toshiba or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 4.35% |
| Values | Daily Returns |
Ford Motor vs. Toshiba
Performance |
| Timeline |
| Ford Motor |
| Toshiba |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Toshiba Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Toshiba
The main advantage of trading using opposite Ford and Toshiba positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Toshiba 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 Toshiba will offset losses from the drop in Toshiba's long position.The idea behind Ford Motor and Toshiba 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.| Toshiba vs. Comstock Holding Companies | Toshiba vs. JetBlue Airways Corp | Toshiba vs. Western Asset Investment | Toshiba vs. Aegean Airlines SA |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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