Correlation Between Ford and IShares National
Can any of the company-specific risk be diversified away by investing in both Ford and IShares National 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 National 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 National Muni, you can compare the effects of market volatilities on Ford and IShares National 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 National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and IShares National.
Diversification Opportunities for Ford and IShares National
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and IShares is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and iShares National Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares National Muni 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 National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares National Muni has no effect on the direction of Ford i.e., Ford and IShares National go up and down completely randomly.
Pair Corralation between Ford and IShares National
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the IShares National. In addition to that, Ford is 8.49 times more volatile than iShares National Muni. It trades about 0.0 of its total potential returns per unit of risk. iShares National Muni is currently generating about 0.06 per unit of volatility. If you would invest 10,213 in iShares National Muni on August 31, 2024 and sell it today you would earn a total of 641.00 from holding iShares National Muni or generate 6.28% 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 National Muni
Performance |
| Timeline |
| Ford Motor |
| iShares National Muni |
Ford and IShares National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and IShares National
The main advantage of trading using opposite Ford and IShares National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, IShares National 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 National will offset losses from the drop in IShares National's long position.The idea behind Ford Motor and iShares National Muni 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 National vs. iShares JP Morgan | IShares National vs. iShares iBoxx Investment | IShares National vs. SPDR Nuveen Bloomberg | IShares National vs. iShares MBS ETF |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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