Correlation Between Ford and Triad Business

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

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

Diversification Opportunities for Ford and Triad Business

0.1

Correlation Coefficient

Ford  Triad Business

Average diversification

The 3 months correlation between Ford and Triad is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Triad Business Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triad Business Bank 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 Triad Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triad Business Bank has no effect on the direction of Ford i.e., Ford and Triad Business go up and down completely randomly.

Pair Corralation between Ford and Triad Business

Taking into account the 90-day investment horizon Ford Motor is expected to generate 3.39 times more return on investment than Triad Business. However, Ford is 3.39 times more volatile than Triad Business Bank. It trades about 0.04 of its potential returns per unit of risk. Triad Business Bank is currently generating about 0.04 per unit of risk. If you would invest  959.00  in Ford Motor on December 22, 2024 and sell it today you would earn a total of  41.00  from holding Ford Motor or generate 4.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Ford Motor  vs.  Triad Business Bank

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Triad Business Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Triad Business Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Triad Business is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and Triad Business

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

The idea behind Ford Motor and Triad Business Bank 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.