Correlation Between Ford and Thornburg Income

Can any of the company-specific risk be diversified away by investing in both Ford and Thornburg Income 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 Income 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 Income Builder, you can compare the effects of market volatilities on Ford and Thornburg Income 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 Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Thornburg Income.

Diversification Opportunities for Ford and Thornburg Income

-0.51

Correlation Coefficient

Ford  Thornburg Income

Excellent diversification

The 3 months correlation between Ford and Thornburg is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Thornburg Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Income Builder 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 Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Income Builder has no effect on the direction of Ford i.e., Ford and Thornburg Income go up and down completely randomly.

Pair Corralation between Ford and Thornburg Income

Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.63 times more return on investment than Thornburg Income. However, Ford is 2.63 times more volatile than Thornburg Income Builder. It trades about 0.03 of its potential returns per unit of risk. Thornburg Income Builder is currently generating about 0.01 per unit of risk. If you would invest  1,083  in Ford Motor on August 31, 2024 and sell it today you would earn a total of  27.00  from holding Ford Motor or generate 2.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Ford Motor  vs.  Thornburg Income Builder

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Income Builder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thornburg Income Builder has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Thornburg Income is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and Thornburg Income

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

The idea behind Ford Motor and Thornburg Income Builder 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..