Correlation Between Ford and IShares Thematic
Can any of the company-specific risk be diversified away by investing in both Ford and IShares Thematic 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 Thematic 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 Thematic Rotation, you can compare the effects of market volatilities on Ford and IShares Thematic 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 Thematic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and IShares Thematic.
Diversification Opportunities for Ford and IShares Thematic
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and IShares is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and iShares Thematic Rotation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Thematic Rotation 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 Thematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Thematic Rotation has no effect on the direction of Ford i.e., Ford and IShares Thematic go up and down completely randomly.
Pair Corralation between Ford and IShares Thematic
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the IShares Thematic. In addition to that, Ford is 2.52 times more volatile than iShares Thematic Rotation. It trades about 0.0 of its total potential returns per unit of risk. iShares Thematic Rotation is currently generating about 0.15 per unit of volatility. If you would invest 2,552 in iShares Thematic Rotation on September 12, 2024 and sell it today you would earn a total of 956.01 from holding iShares Thematic Rotation or generate 37.46% 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. iShares Thematic Rotation
Performance |
| Timeline |
| Ford Motor |
| iShares Thematic Rotation |
Ford and IShares Thematic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and IShares Thematic
The main advantage of trading using opposite Ford and IShares Thematic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, IShares Thematic 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 Thematic will offset losses from the drop in IShares Thematic's long position.The idea behind Ford Motor and iShares Thematic Rotation 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 Thematic vs. Vanguard SP 500 | IShares Thematic vs. Vanguard Real Estate | IShares Thematic vs. Vanguard Total Bond | IShares Thematic vs. Vanguard High Dividend |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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