Correlation Between Ford and American Funds
Can any of the company-specific risk be diversified away by investing in both Ford and American Funds 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 American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and American Funds Developing, you can compare the effects of market volatilities on Ford and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and American Funds.
Diversification Opportunities for Ford and American Funds
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and American is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and American Funds Developing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Developing 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Developing has no effect on the direction of Ford i.e., Ford and American Funds go up and down completely randomly.
Pair Corralation between Ford and American Funds
Taking into account the 90-day investment horizon Ford is expected to generate 1.54 times less return on investment than American Funds. In addition to that, Ford is 2.94 times more volatile than American Funds Developing. It trades about 0.01 of its total potential returns per unit of risk. American Funds Developing is currently generating about 0.04 per unit of volatility. If you would invest 924.00 in American Funds Developing on September 3, 2024 and sell it today you would earn a total of 143.00 from holding American Funds Developing or generate 15.48% 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. American Funds Developing
Performance |
| Timeline |
| Ford Motor |
| American Funds Developing |
Ford and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and American Funds
The main advantage of trading using opposite Ford and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.The idea behind Ford Motor and American Funds Developing 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.| American Funds vs. Blackrock Financial Institutions | American Funds vs. Vanguard Financials Index | American Funds vs. Prudential Financial Services | American Funds vs. Goldman Sachs Financial |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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