Correlation Between Ford and TPI Composites

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

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

Diversification Opportunities for Ford and TPI Composites

0.56

Correlation Coefficient

Ford  TPI Composites

Very weak diversification

The 3 months correlation between Ford and TPI is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and TPI Composites in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPI Composites 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 TPI Composites. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPI Composites has no effect on the direction of Ford i.e., Ford and TPI Composites go up and down completely randomly.

Pair Corralation between Ford and TPI Composites

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the TPI Composites. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 4.22 times less risky than TPI Composites. The stock trades about 0.0 of its potential returns per unit of risk. The TPI Composites is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  374.00  in TPI Composites on December 2, 2024 and sell it today you would lose (261.00) from holding TPI Composites or give up 69.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  TPI Composites

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

TPI Composites

Risk-Adjusted Performance

Very Weak

Over the last 90 days TPI Composites has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ford and TPI Composites

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

The idea behind Ford Motor and TPI Composites 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.