Correlation Between Ford and IShares Russell
Can any of the company-specific risk be diversified away by investing in both Ford and IShares Russell 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 Russell 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 Russell Top, you can compare the effects of market volatilities on Ford and IShares Russell 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 Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and IShares Russell.
Diversification Opportunities for Ford and IShares Russell
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and IShares is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and iShares Russell Top in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell Top 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 Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell Top has no effect on the direction of Ford i.e., Ford and IShares Russell go up and down completely randomly.
Pair Corralation between Ford and IShares Russell
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.61 times more return on investment than IShares Russell. However, Ford is 2.61 times more volatile than iShares Russell Top. It trades about 0.23 of its potential returns per unit of risk. iShares Russell Top is currently generating about 0.34 per unit of risk. If you would invest 1,015 in Ford Motor on September 1, 2024 and sell it today you would earn a total of 98.00 from holding Ford Motor or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. iShares Russell Top
Performance |
| Timeline |
| Ford Motor |
| iShares Russell Top |
Ford and IShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and IShares Russell
The main advantage of trading using opposite Ford and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, IShares Russell 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 Russell will offset losses from the drop in IShares Russell's long position.The idea behind Ford Motor and iShares Russell Top 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 Russell vs. Vanguard Total Stock | IShares Russell vs. SPDR SP 500 | IShares Russell vs. iShares Core SP | IShares Russell vs. Vanguard Dividend Appreciation |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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