Correlation Between Ford and Thungela Resources
Can any of the company-specific risk be diversified away by investing in both Ford and Thungela Resources 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 Thungela Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Thungela Resources Limited, you can compare the effects of market volatilities on Ford and Thungela Resources 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 Thungela Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Thungela Resources.
Diversification Opportunities for Ford and Thungela Resources
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Thungela is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Thungela Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thungela Resources 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 Thungela Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thungela Resources has no effect on the direction of Ford i.e., Ford and Thungela Resources go up and down completely randomly.
Pair Corralation between Ford and Thungela Resources
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Thungela Resources. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.9 times less risky than Thungela Resources. The stock trades about -0.27 of its potential returns per unit of risk. The Thungela Resources Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 661.00 in Thungela Resources Limited on October 10, 2024 and sell it today you would earn a total of 44.00 from holding Thungela Resources Limited or generate 6.66% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 80.95% |
Values | Daily Returns |
Ford Motor vs. Thungela Resources Limited
Performance |
Timeline |
Ford Motor |
Thungela Resources |
Ford and Thungela Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Thungela Resources
The main advantage of trading using opposite Ford and Thungela Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Thungela Resources 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 Thungela Resources will offset losses from the drop in Thungela Resources' long position.Ford vs. Canoo Inc | Ford vs. Aquagold International | Ford vs. Morningstar Unconstrained Allocation | Ford vs. Thrivent High Yield |
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Check out your portfolio center.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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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