Correlation Between Ford and TMT Acquisition

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

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

Diversification Opportunities for Ford and TMT Acquisition

0.72

Correlation Coefficient

Ford  TMT Acquisition

Poor diversification

The 3 months correlation between Ford and TMT is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and TMT Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMT Acquisition Corp 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 TMT Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMT Acquisition Corp has no effect on the direction of Ford i.e., Ford and TMT Acquisition go up and down completely randomly.

Pair Corralation between Ford and TMT Acquisition

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.42 times more return on investment than TMT Acquisition. However, Ford Motor is 2.4 times less risky than TMT Acquisition. It trades about 0.0 of its potential returns per unit of risk. TMT Acquisition Corp is currently generating about -0.07 per unit of risk. If you would invest  1,071  in Ford Motor on October 9, 2024 and sell it today you would lose (95.00) from holding Ford Motor or give up 8.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.07%
Values	Daily Returns

Ford Motor  vs.  TMT Acquisition Corp

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

TMT Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TMT Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ford and TMT Acquisition

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

The idea behind Ford Motor and TMT Acquisition Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.