Correlation Between Ford and TGCC SA

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

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

Diversification Opportunities for Ford and TGCC SA

-0.13

Correlation Coefficient

Ford  TGCC SA

Good diversification

The 3 months correlation between Ford and TGCC is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and TGCC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TGCC SA 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 TGCC SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TGCC SA has no effect on the direction of Ford i.e., Ford and TGCC SA go up and down completely randomly.

Pair Corralation between Ford and TGCC SA

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the TGCC SA. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.29 times less risky than TGCC SA. The stock trades about -0.22 of its potential returns per unit of risk. The TGCC SA is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  47,800  in TGCC SA on October 9, 2024 and sell it today you would earn a total of  4,300  from holding TGCC SA or generate 9.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Ford Motor  vs.  TGCC SA

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.

TGCC SA

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TGCC SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, TGCC SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and TGCC SA

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

The idea behind Ford Motor and TGCC 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.