Correlation Between Ford and Thurgauer Kantonalbank

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

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

Diversification Opportunities for Ford and Thurgauer Kantonalbank

-0.19

Correlation Coefficient

Ford  Thurgauer Kantonalbank

Good diversification

The 3 months correlation between Ford and Thurgauer is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Thurgauer Kantonalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thurgauer Kantonalbank 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 Thurgauer Kantonalbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thurgauer Kantonalbank has no effect on the direction of Ford i.e., Ford and Thurgauer Kantonalbank go up and down completely randomly.

Pair Corralation between Ford and Thurgauer Kantonalbank

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Thurgauer Kantonalbank. In addition to that, Ford is 2.03 times more volatile than Thurgauer Kantonalbank. It trades about -0.02 of its total potential returns per unit of risk. Thurgauer Kantonalbank is currently generating about 0.03 per unit of volatility. If you would invest  12,450  in Thurgauer Kantonalbank on September 25, 2024 and sell it today you would earn a total of  200.00  from holding Thurgauer Kantonalbank or generate 1.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Ford Motor  vs.  Thurgauer Kantonalbank

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.

Thurgauer Kantonalbank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thurgauer Kantonalbank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Thurgauer Kantonalbank is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ford and Thurgauer Kantonalbank

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

The idea behind Ford Motor and Thurgauer Kantonalbank 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.