Correlation Between Ford and Thornburg Value

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

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

Diversification Opportunities for Ford and Thornburg Value

0.41

Correlation Coefficient

Ford  Thornburg Value

Very weak diversification

The 3 months correlation between Ford and Thornburg is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Thornburg Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Value 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 Thornburg Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Value has no effect on the direction of Ford i.e., Ford and Thornburg Value go up and down completely randomly.

Pair Corralation between Ford and Thornburg Value

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Thornburg Value. In addition to that, Ford is 1.87 times more volatile than Thornburg Value Fund. It trades about -0.01 of its total potential returns per unit of risk. Thornburg Value Fund is currently generating about 0.17 per unit of volatility. If you would invest  7,912  in Thornburg Value Fund on September 15, 2024 and sell it today you would earn a total of  983.00  from holding Thornburg Value Fund or generate 12.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  Thornburg Value Fund

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.

Thornburg Value

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Value Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Thornburg Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and Thornburg Value

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

The idea behind Ford Motor and Thornburg Value Fund 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.