Correlation Between Ford and ETRACS IFED
Can any of the company-specific risk be diversified away by investing in both Ford and ETRACS IFED 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 ETRACS IFED into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and ETRACS IFED Invest, you can compare the effects of market volatilities on Ford and ETRACS IFED 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 ETRACS IFED. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and ETRACS IFED.
Diversification Opportunities for Ford and ETRACS IFED
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and ETRACS is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ETRACS IFED Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS IFED Invest 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 ETRACS IFED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS IFED Invest has no effect on the direction of Ford i.e., Ford and ETRACS IFED go up and down completely randomly.
Pair Corralation between Ford and ETRACS IFED
Taking into account the 90-day investment horizon Ford is expected to generate 3.5 times less return on investment than ETRACS IFED. In addition to that, Ford is 2.16 times more volatile than ETRACS IFED Invest. It trades about 0.01 of its total potential returns per unit of risk. ETRACS IFED Invest is currently generating about 0.09 per unit of volatility. If you would invest 2,781 in ETRACS IFED Invest on August 30, 2024 and sell it today you would earn a total of 1,475 from holding ETRACS IFED Invest or generate 53.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. ETRACS IFED Invest
Performance |
| Timeline |
| Ford Motor |
| ETRACS IFED Invest |
Ford and ETRACS IFED Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and ETRACS IFED
The main advantage of trading using opposite Ford and ETRACS IFED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, ETRACS IFED 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 ETRACS IFED will offset losses from the drop in ETRACS IFED's long position.The idea behind Ford Motor and ETRACS IFED Invest 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.| ETRACS IFED vs. Freedom Day Dividend | ETRACS IFED vs. Franklin Templeton ETF | ETRACS IFED vs. iShares MSCI China | ETRACS IFED vs. Tidal Trust II |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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