Correlation Between Ford and Tongxing Environmental

Can any of the company-specific risk be diversified away by investing in both Ford and Tongxing Environmental 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 Tongxing Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and Tongxing Environmental Protection, you can compare the effects of market volatilities on Ford and Tongxing Environmental 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 Tongxing Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Tongxing Environmental.

Diversification Opportunities for Ford and Tongxing Environmental

0.22

Correlation Coefficient

Ford  Tongxing Environmental

Modest diversification

The 3 months correlation between Ford and Tongxing is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Tongxing Environmental Protect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongxing Environmental 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 Tongxing Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongxing Environmental has no effect on the direction of Ford i.e., Ford and Tongxing Environmental go up and down completely randomly.

Pair Corralation between Ford and Tongxing Environmental

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.16 times more return on investment than Tongxing Environmental. However, Ford is 1.16 times more volatile than Tongxing Environmental Protection. It trades about 0.02 of its potential returns per unit of risk. Tongxing Environmental Protection is currently generating about 0.0 per unit of risk. If you would invest  957.00  in Ford Motor on December 30, 2024 and sell it today you would earn a total of  15.00  from holding Ford Motor or generate 1.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Ford Motor  vs.  Tongxing Environmental Protect

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Tongxing Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tongxing Environmental Protection has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tongxing Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Tongxing Environmental

The main advantage of trading using opposite Ford and Tongxing Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Tongxing Environmental 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 Tongxing Environmental will offset losses from the drop in Tongxing Environmental's long position.

The idea behind Ford Motor and Tongxing Environmental Protection 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.