Correlation Between Ford and SPDR Barclays
Can any of the company-specific risk be diversified away by investing in both Ford and SPDR Barclays 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 SPDR Barclays into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and SPDR Barclays Euro, you can compare the effects of market volatilities on Ford and SPDR Barclays 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 SPDR Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and SPDR Barclays.
Diversification Opportunities for Ford and SPDR Barclays
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and SPDR is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and SPDR Barclays Euro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Euro 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 SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Euro has no effect on the direction of Ford i.e., Ford and SPDR Barclays go up and down completely randomly.
Pair Corralation between Ford and SPDR Barclays
Taking into account the 90-day investment horizon Ford Motor is expected to generate 14.04 times more return on investment than SPDR Barclays. However, Ford is 14.04 times more volatile than SPDR Barclays Euro. It trades about 0.03 of its potential returns per unit of risk. SPDR Barclays Euro is currently generating about 0.07 per unit of risk. If you would invest 1,109 in Ford Motor on August 25, 2024 and sell it today you would earn a total of 9.00 from holding Ford Motor or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. SPDR Barclays Euro
Performance |
| Timeline |
| Ford Motor |
| SPDR Barclays Euro |
Ford and SPDR Barclays Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and SPDR Barclays
The main advantage of trading using opposite Ford and SPDR Barclays positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, SPDR Barclays 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 SPDR Barclays will offset losses from the drop in SPDR Barclays' long position.The idea behind Ford Motor and SPDR Barclays Euro 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.| SPDR Barclays vs. Leverage Shares 3x | SPDR Barclays vs. Leverage Shares 3x | SPDR Barclays vs. Leverage Shares 3x | SPDR Barclays vs. WisdomTree Short GBP |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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