Correlation Between Ford and IShares Aaa

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

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

Diversification Opportunities for Ford and IShares Aaa

-0.18

Correlation Coefficient

Ford  IShares Aaa

Good diversification

The 3 months correlation between Ford and IShares is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and iShares Aaa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Aaa 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 IShares Aaa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Aaa has no effect on the direction of Ford i.e., Ford and IShares Aaa go up and down completely randomly.

Pair Corralation between Ford and IShares Aaa

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the IShares Aaa. In addition to that, Ford is 5.83 times more volatile than iShares Aaa . It trades about -0.15 of its total potential returns per unit of risk. iShares Aaa is currently generating about -0.22 per unit of volatility. If you would invest  4,684  in iShares Aaa on February 1, 2024 and sell it today you would lose (92.00) from holding iShares Aaa or give up 1.96% of portfolio value over 90 days.

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

Ford Motor  vs.  iShares Aaa

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.

iShares Aaa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Aaa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Aaa 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 IShares Aaa

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

The idea behind Ford Motor and iShares Aaa 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 Stocks Directory module to find actively traded stocks across global markets.