Correlation Between Ford and TPT Strategic

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

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

Diversification Opportunities for Ford and TPT Strategic

-0.41

Correlation Coefficient

Ford  TPT Strategic

Very good diversification

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

Pair Corralation between Ford and TPT Strategic

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the TPT Strategic. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 12.92 times less risky than TPT Strategic. The stock trades about 0.0 of its potential returns per unit of risk. The TPT Strategic is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  296.00  in TPT Strategic on September 28, 2024 and sell it today you would earn a total of  648.00  from holding TPT Strategic or generate 218.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  TPT Strategic

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.

TPT Strategic

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TPT Strategic are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, TPT Strategic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and TPT Strategic

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

The idea behind Ford Motor and TPT Strategic 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.