Correlation Between Ford and Ta Ya

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

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

Diversification Opportunities for Ford and Ta Ya

-0.12

Correlation Coefficient

Ford  Ta Ya

Good diversification

The 3 months correlation between Ford and 1609 is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Ta Ya Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ta Ya Electric 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 Ta Ya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ta Ya Electric has no effect on the direction of Ford i.e., Ford and Ta Ya go up and down completely randomly.

Pair Corralation between Ford and Ta Ya

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.11 times more return on investment than Ta Ya. However, Ford is 1.11 times more volatile than Ta Ya Electric. It trades about 0.05 of its potential returns per unit of risk. Ta Ya Electric is currently generating about -0.02 per unit of risk. If you would invest  975.00  in Ford Motor on December 26, 2024 and sell it today you would earn a total of  54.00  from holding Ford Motor or generate 5.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.67%
Values	Daily Returns

Ford Motor  vs.  Ta Ya Electric

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ta Ya Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ta Ya Electric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ta Ya is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ford and Ta Ya

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

The idea behind Ford Motor and Ta Ya Electric 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.