Correlation Between Ford and Thai Airways

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

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

Diversification Opportunities for Ford and Thai Airways

0.38

Correlation Coefficient

Ford  Thai Airways

Weak diversification

The 3 months correlation between Ford and Thai is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Thai Airways International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Airways Interna 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 Thai Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Airways Interna has no effect on the direction of Ford i.e., Ford and Thai Airways go up and down completely randomly.

Pair Corralation between Ford and Thai Airways

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Thai Airways. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 14.24 times less risky than Thai Airways. The stock trades about -0.14 of its potential returns per unit of risk. The Thai Airways International is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Thai Airways International on January 20, 2024 and sell it today you would lose (1.60) from holding Thai Airways International or give up 64.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  Thai Airways International

Ford Motor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Thai Airways Interna

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Airways International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Thai Airways reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Thai Airways

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

The idea behind Ford Motor and Thai Airways International 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.

Check out your portfolio center.

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.