Correlation Between Ford and IShares SP
Can any of the company-specific risk be diversified away by investing in both Ford and IShares SP 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 SP 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 SP 500, you can compare the effects of market volatilities on Ford and IShares SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and IShares SP.
Diversification Opportunities for Ford and IShares SP
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and IShares is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of Ford i.e., Ford and IShares SP go up and down completely randomly.
Pair Corralation between Ford and IShares SP
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the IShares SP. In addition to that, Ford is 2.12 times more volatile than iShares SP 500. It trades about 0.0 of its total potential returns per unit of risk. iShares SP 500 is currently generating about 0.09 per unit of volatility. If you would invest 8,253 in iShares SP 500 on August 27, 2024 and sell it today you would earn a total of 1,709 from holding iShares SP 500 or generate 20.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. iShares SP 500
Performance |
| Timeline |
| Ford Motor |
| iShares SP 500 |
Ford and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and IShares SP
The main advantage of trading using opposite Ford and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, IShares SP 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 SP will offset losses from the drop in IShares SP's long position.The idea behind Ford Motor and iShares SP 500 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.| IShares SP vs. Invesco Dynamic Large | IShares SP vs. Perella Weinberg Partners | IShares SP vs. HUMANA INC | IShares SP vs. Aquagold International |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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