Correlation Between Ford and Toromont Industries

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

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

Diversification Opportunities for Ford and Toromont Industries

0.24

Correlation Coefficient

Ford  Toromont Industries

Modest diversification

The 3 months correlation between Ford and Toromont is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Toromont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toromont Industries 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 Toromont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toromont Industries has no effect on the direction of Ford i.e., Ford and Toromont Industries go up and down completely randomly.

Pair Corralation between Ford and Toromont Industries

Taking into account the 90-day investment horizon Ford is expected to generate 12.0 times less return on investment than Toromont Industries. In addition to that, Ford is 1.32 times more volatile than Toromont Industries. It trades about 0.0 of its total potential returns per unit of risk. Toromont Industries is currently generating about 0.02 per unit of volatility. If you would invest  6,723  in Toromont Industries on October 15, 2024 and sell it today you would earn a total of  827.00  from holding Toromont Industries or generate 12.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.0%
Values	Daily Returns

Ford Motor  vs.  Toromont Industries

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Toromont Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toromont Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ford and Toromont Industries

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

The idea behind Ford Motor and Toromont Industries 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.