Correlation Between Ford and Guangdong Transtek

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

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

Diversification Opportunities for Ford and Guangdong Transtek

-0.14

Correlation Coefficient

Ford  Guangdong Transtek

Good diversification

The 3 months correlation between Ford and Guangdong is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Guangdong Transtek Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Transtek 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 Guangdong Transtek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Transtek has no effect on the direction of Ford i.e., Ford and Guangdong Transtek go up and down completely randomly.

Pair Corralation between Ford and Guangdong Transtek

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.23 times more return on investment than Guangdong Transtek. However, Ford Motor is 4.28 times less risky than Guangdong Transtek. It trades about -0.25 of its potential returns per unit of risk. Guangdong Transtek Medical is currently generating about -0.08 per unit of risk. If you would invest  1,056  in Ford Motor on October 11, 2024 and sell it today you would lose (82.00) from holding Ford Motor or give up 7.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  Guangdong Transtek Medical

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.

Guangdong Transtek

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Transtek Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Transtek may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ford and Guangdong Transtek

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

The idea behind Ford Motor and Guangdong Transtek Medical 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.