Correlation Between Ford and Turning Point
Can any of the company-specific risk be diversified away by investing in both Ford and Turning Point 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 Turning Point into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Turning Point Brands, you can compare the effects of market volatilities on Ford and Turning Point 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 Turning Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Turning Point.
Diversification Opportunities for Ford and Turning Point
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Turning is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Turning Point Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Turning Point Brands 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 Turning Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Turning Point Brands has no effect on the direction of Ford i.e., Ford and Turning Point go up and down completely randomly.
Pair Corralation between Ford and Turning Point
Taking into account the 90-day investment horizon Ford is expected to generate 75.17 times less return on investment than Turning Point. In addition to that, Ford is 1.24 times more volatile than Turning Point Brands. It trades about 0.01 of its total potential returns per unit of risk. Turning Point Brands is currently generating about 0.65 per unit of volatility. If you would invest 4,673 in Turning Point Brands on August 27, 2024 and sell it today you would earn a total of 1,592 from holding Turning Point Brands or generate 34.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Turning Point Brands
Performance |
| Timeline |
| Ford Motor |
| Turning Point Brands |
Ford and Turning Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Turning Point
The main advantage of trading using opposite Ford and Turning Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Turning Point 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 Turning Point will offset losses from the drop in Turning Point's long position.The idea behind Ford Motor and Turning Point Brands 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.| Turning Point vs. Universal | Turning Point vs. Imperial Brands PLC | Turning Point vs. British American Tobacco | Turning Point vs. Philip Morris International |
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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