Correlation Between Ford and Thornburg Low

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

Diversification Opportunities for Ford and Thornburg Low

0.37

Correlation Coefficient

Ford  Thornburg Low

Weak diversification

The 3 months correlation between Ford and Thornburg is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Thornburg Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Low Duration 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 Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Low Duration has no effect on the direction of Ford i.e., Ford and Thornburg Low go up and down completely randomly.

Pair Corralation between Ford and Thornburg Low

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Thornburg Low. In addition to that, Ford is 26.31 times more volatile than Thornburg Low Duration. It trades about -0.01 of its total potential returns per unit of risk. Thornburg Low Duration is currently generating about 0.21 per unit of volatility. If you would invest  1,192  in Thornburg Low Duration on September 12, 2024 and sell it today you would earn a total of  30.00  from holding Thornburg Low Duration or generate 2.52% return on investment over 90 days.

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

Ford Motor  vs.  Thornburg Low Duration

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) 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 Low Duration

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Low Duration are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Thornburg Low is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Thornburg Low

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

The idea behind Ford Motor and Thornburg Low Duration 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.