Correlation Between Ford and Tuya
Can any of the company-specific risk be diversified away by investing in both Ford and Tuya 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 Tuya into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Tuya Inc ADR, you can compare the effects of market volatilities on Ford and Tuya 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 Tuya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Tuya.
Diversification Opportunities for Ford and Tuya
Good diversification
The 3 months correlation between Ford and Tuya is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Tuya Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tuya Inc ADR 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 Tuya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tuya Inc ADR has no effect on the direction of Ford i.e., Ford and Tuya go up and down completely randomly.
Pair Corralation between Ford and Tuya
Taking into account the 90-day investment horizon Ford is expected to generate 3.6 times less return on investment than Tuya. But when comparing it to its historical volatility, Ford Motor is 1.76 times less risky than Tuya. It trades about 0.01 of its potential returns per unit of risk. Tuya Inc ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 168.00 in Tuya Inc ADR on August 31, 2024 and sell it today you would lose (2.00) from holding Tuya Inc ADR or give up 1.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Tuya Inc ADR
Performance |
| Timeline |
| Ford Motor |
| Tuya Inc ADR |
Ford and Tuya Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Tuya
The main advantage of trading using opposite Ford and Tuya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Tuya 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 Tuya will offset losses from the drop in Tuya's long position.The idea behind Ford Motor and Tuya Inc ADR 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.| Tuya vs. Repay Holdings Corp | Tuya vs. Global Blue Group | Tuya vs. Optiva Inc | Tuya vs. Sangoma Technologies Corp |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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