Correlation Between Ford and T4F Entretenimento

Can any of the company-specific risk be diversified away by investing in both Ford and T4F Entretenimento 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 T4F Entretenimento into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and T4F Entretenimento SA, you can compare the effects of market volatilities on Ford and T4F Entretenimento 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 T4F Entretenimento. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and T4F Entretenimento.

Diversification Opportunities for Ford and T4F Entretenimento

0.26

Correlation Coefficient

Ford  T4F Entretenimento

Modest diversification

The 3 months correlation between Ford and T4F is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and T4F Entretenimento SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T4F Entretenimento 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 T4F Entretenimento. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T4F Entretenimento has no effect on the direction of Ford i.e., Ford and T4F Entretenimento go up and down completely randomly.

Pair Corralation between Ford and T4F Entretenimento

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the T4F Entretenimento. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.31 times less risky than T4F Entretenimento. The stock trades about -0.03 of its potential returns per unit of risk. The T4F Entretenimento SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  72.00  in T4F Entretenimento SA on December 6, 2024 and sell it today you would lose (1.00) from holding T4F Entretenimento SA or give up 1.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  T4F Entretenimento SA

Ford Motor

Risk-Adjusted Performance

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.

T4F Entretenimento

Risk-Adjusted Performance

Weak

Over the last 90 days T4F Entretenimento SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, T4F Entretenimento is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and T4F Entretenimento

The main advantage of trading using opposite Ford and T4F Entretenimento positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, T4F Entretenimento 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 T4F Entretenimento will offset losses from the drop in T4F Entretenimento's long position.

The idea behind Ford Motor and T4F Entretenimento SA 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.