Correlation Between Ford and TravelCenters

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

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

Diversification Opportunities for Ford and TravelCenters

0.29

Correlation Coefficient

Ford  TravelCenters

Modest diversification

The 3 months correlation between Ford and TravelCenters is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and TravelCenters Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TravelCenters Of America 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 TravelCenters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TravelCenters Of America has no effect on the direction of Ford i.e., Ford and TravelCenters go up and down completely randomly.

Pair Corralation between Ford and TravelCenters

If you would invest  2,526  in TravelCenters Of America on September 15, 2024 and sell it today you would earn a total of  0.00  from holding TravelCenters Of America or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Ford Motor  vs.  TravelCenters Of America

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.

TravelCenters Of America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TravelCenters Of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, TravelCenters is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and TravelCenters

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

The idea behind Ford Motor and TravelCenters Of America 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.