Correlation Between Ford and Tourmaline Oil
Can any of the company-specific risk be diversified away by investing in both Ford and Tourmaline Oil 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 Tourmaline Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Tourmaline Oil Corp, you can compare the effects of market volatilities on Ford and Tourmaline Oil 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 Tourmaline Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Tourmaline Oil.
Diversification Opportunities for Ford and Tourmaline Oil
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Tourmaline is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Tourmaline Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tourmaline Oil 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 Tourmaline Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tourmaline Oil Corp has no effect on the direction of Ford i.e., Ford and Tourmaline Oil go up and down completely randomly.
Pair Corralation between Ford and Tourmaline Oil
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Tourmaline Oil. In addition to that, Ford is 2.06 times more volatile than Tourmaline Oil Corp. It trades about -0.09 of its total potential returns per unit of risk. Tourmaline Oil Corp is currently generating about -0.15 per unit of volatility. If you would invest 6,872 in Tourmaline Oil Corp on November 9, 2024 and sell it today you would lose (276.00) from holding Tourmaline Oil Corp or give up 4.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Ford Motor vs. Tourmaline Oil Corp
Performance |
| Timeline |
| Ford Motor |
| Tourmaline Oil Corp |
Ford and Tourmaline Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Tourmaline Oil
The main advantage of trading using opposite Ford and Tourmaline Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Tourmaline Oil 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 Tourmaline Oil will offset losses from the drop in Tourmaline Oil's long position.The idea behind Ford Motor and Tourmaline Oil 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.| Tourmaline Oil vs. ARC Resources | Tourmaline Oil vs. Whitecap Resources | Tourmaline Oil vs. MEG Energy Corp | Tourmaline Oil vs. Birchcliff Energy |
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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