Correlation Between Ford and Taita Chemical

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

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

Diversification Opportunities for Ford and Taita Chemical

-0.37

Correlation Coefficient

Ford  Taita Chemical

Very good diversification

The 3 months correlation between Ford and Taita is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Taita Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taita Chemical 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 Taita Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taita Chemical has no effect on the direction of Ford i.e., Ford and Taita Chemical go up and down completely randomly.

Pair Corralation between Ford and Taita Chemical

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.83 times more return on investment than Taita Chemical. However, Ford Motor is 1.21 times less risky than Taita Chemical. It trades about -0.05 of its potential returns per unit of risk. Taita Chemical Co is currently generating about -0.16 per unit of risk. If you would invest  1,075  in Ford Motor on September 17, 2024 and sell it today you would lose (77.50) from holding Ford Motor or give up 7.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  Taita Chemical Co

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Taita Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taita Chemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Ford and Taita Chemical

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

The idea behind Ford Motor and Taita Chemical Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.