Correlation Between Ford and TIANQI LITHIUM

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

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

Diversification Opportunities for Ford and TIANQI LITHIUM

0.41

Correlation Coefficient

Ford  TIANQI LITHIUM

Very weak diversification

The 3 months correlation between Ford and TIANQI is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and TIANQI LITHIUM H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIANQI LITHIUM H 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 TIANQI LITHIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIANQI LITHIUM H has no effect on the direction of Ford i.e., Ford and TIANQI LITHIUM go up and down completely randomly.

Pair Corralation between Ford and TIANQI LITHIUM

Taking into account the 90-day investment horizon Ford is expected to generate 29.2 times less return on investment than TIANQI LITHIUM. But when comparing it to its historical volatility, Ford Motor is 3.16 times less risky than TIANQI LITHIUM. It trades about 0.0 of its potential returns per unit of risk. TIANQI LITHIUM H is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  188.00  in TIANQI LITHIUM H on October 7, 2024 and sell it today you would earn a total of  88.00  from holding TIANQI LITHIUM H or generate 46.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.8%
Values	Daily Returns

Ford Motor  vs.  TIANQI LITHIUM H

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.

TIANQI LITHIUM H

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TIANQI LITHIUM H has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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 TIANQI LITHIUM

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

The idea behind Ford Motor and TIANQI LITHIUM H 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.