Correlation Between Ford and Vodafone Group
Can any of the company-specific risk be diversified away by investing in both Ford and Vodafone Group 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 Vodafone Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Vodafone Group PLC, you can compare the effects of market volatilities on Ford and Vodafone Group 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 Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Vodafone Group.
Diversification Opportunities for Ford and Vodafone Group
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Vodafone is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group PLC 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of Ford i.e., Ford and Vodafone Group go up and down completely randomly.
Pair Corralation between Ford and Vodafone Group
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.83 times more return on investment than Vodafone Group. However, Ford Motor is 1.2 times less risky than Vodafone Group. It trades about 0.17 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about -0.07 per unit of risk. If you would invest 1,033 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 77.00 from holding Ford Motor or generate 7.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Vodafone Group PLC
Performance |
| Timeline |
| Ford Motor |
| Vodafone Group PLC |
Ford and Vodafone Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Vodafone Group
The main advantage of trading using opposite Ford and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Vodafone Group 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 Vodafone Group will offset losses from the drop in Vodafone Group's long position.The idea behind Ford Motor and Vodafone Group PLC 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.| Vodafone Group vs. Zegona Communications Plc | Vodafone Group vs. GreenX Metals | Vodafone Group vs. Fonix Mobile plc | Vodafone Group vs. Bisichi Mining PLC |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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