Correlation Between Ford and Truist Financial

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

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

Diversification Opportunities for Ford and Truist Financial

-0.23

Correlation Coefficient

Ford  Truist Financial

Very good diversification

The 3 months correlation between Ford and Truist is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial 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 Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial has no effect on the direction of Ford i.e., Ford and Truist Financial go up and down completely randomly.

Pair Corralation between Ford and Truist Financial

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Truist Financial. In addition to that, Ford is 1.39 times more volatile than Truist Financial. It trades about -0.07 of its total potential returns per unit of risk. Truist Financial is currently generating about 0.12 per unit of volatility. If you would invest  22,094  in Truist Financial on October 22, 2024 and sell it today you would earn a total of  5,959  from holding Truist Financial or generate 26.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.4%
Values	Daily Returns

Ford Motor  vs.  Truist Financial

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.

Truist Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Truist Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Truist Financial

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

The idea behind Ford Motor and Truist Financial 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 Transaction History module to view history of all your transactions and understand their impact on performance.