Correlation Between Ferrari NV and Thor Industries

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

By analyzing existing cross correlation between Ferrari NV and Thor Industries, you can compare the effects of market volatilities on Ferrari NV and Thor Industries 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 Ferrari NV with a short position of Thor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrari NV and Thor Industries.

Diversification Opportunities for Ferrari NV and Thor Industries

-0.33

Correlation Coefficient

Ferrari NV  Thor Industries

Very good diversification

The 3 months correlation between Ferrari and Thor is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ferrari NV and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries and Ferrari NV 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 Ferrari NV are associated (or correlated) with Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of Ferrari NV i.e., Ferrari NV and Thor Industries go up and down completely randomly.

Pair Corralation between Ferrari NV and Thor Industries

Given the investment horizon of 90 days Ferrari NV is expected to under-perform the Thor Industries. But the stock apears to be less risky and, when comparing its historical volatility, Ferrari NV is 1.31 times less risky than Thor Industries. The stock trades about -0.02 of its potential returns per unit of risk. The Thor Industries is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  10,126  in Thor Industries on September 15, 2024 and sell it today you would earn a total of  335.00  from holding Thor Industries or generate 3.31% return on investment over 90 days.

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

Ferrari NV  vs.  Thor Industries

Ferrari NV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Thor Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thor Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Thor Industries is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ferrari NV and Thor Industries

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

The idea behind Ferrari NV and Thor Industries 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.