Correlation Between Ford and Touchstone Exploration
Can any of the company-specific risk be diversified away by investing in both Ford and Touchstone Exploration 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 Touchstone Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Touchstone Exploration, you can compare the effects of market volatilities on Ford and Touchstone Exploration 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 Touchstone Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Touchstone Exploration.
Diversification Opportunities for Ford and Touchstone Exploration
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Touchstone is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Touchstone Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Exploration 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 Touchstone Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Exploration has no effect on the direction of Ford i.e., Ford and Touchstone Exploration go up and down completely randomly.
Pair Corralation between Ford and Touchstone Exploration
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.53 times more return on investment than Touchstone Exploration. However, Ford Motor is 1.88 times less risky than Touchstone Exploration. It trades about 0.25 of its potential returns per unit of risk. Touchstone Exploration is currently generating about -0.07 per unit of risk. If you would invest 1,008 in Ford Motor on September 2, 2024 and sell it today you would earn a total of 105.00 from holding Ford Motor or generate 10.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Touchstone Exploration
Performance |
| Timeline |
| Ford Motor |
| Touchstone Exploration |
Ford and Touchstone Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Touchstone Exploration
The main advantage of trading using opposite Ford and Touchstone Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Touchstone Exploration 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 Touchstone Exploration will offset losses from the drop in Touchstone Exploration's long position.The idea behind Ford Motor and Touchstone Exploration 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.| Touchstone Exploration vs. Headwater Exploration | Touchstone Exploration vs. Gear Energy | Touchstone Exploration vs. Canacol Energy | Touchstone Exploration vs. InPlay Oil 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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