Correlation Between Ford and IShares GovernmentCredit
Can any of the company-specific risk be diversified away by investing in both Ford and IShares GovernmentCredit 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 GovernmentCredit 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 GovernmentCredit Bond, you can compare the effects of market volatilities on Ford and IShares GovernmentCredit 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 GovernmentCredit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and IShares GovernmentCredit.
Diversification Opportunities for Ford and IShares GovernmentCredit
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and IShares is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and iShares GovernmentCredit Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares GovernmentCredit 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 GovernmentCredit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares GovernmentCredit has no effect on the direction of Ford i.e., Ford and IShares GovernmentCredit go up and down completely randomly.
Pair Corralation between Ford and IShares GovernmentCredit
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the IShares GovernmentCredit. In addition to that, Ford is 7.21 times more volatile than iShares GovernmentCredit Bond. It trades about 0.0 of its total potential returns per unit of risk. iShares GovernmentCredit Bond is currently generating about 0.05 per unit of volatility. If you would invest 10,353 in iShares GovernmentCredit Bond on August 29, 2024 and sell it today you would earn a total of 38.00 from holding iShares GovernmentCredit Bond or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. iShares GovernmentCredit Bond
Performance |
| Timeline |
| Ford Motor |
| IShares GovernmentCredit |
Ford and IShares GovernmentCredit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and IShares GovernmentCredit
The main advantage of trading using opposite Ford and IShares GovernmentCredit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, IShares GovernmentCredit 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 GovernmentCredit will offset losses from the drop in IShares GovernmentCredit's long position.The idea behind Ford Motor and iShares GovernmentCredit Bond 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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