Correlation Between Ford and United States
Can any of the company-specific risk be diversified away by investing in both Ford and United States 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 United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and United States Commodity, you can compare the effects of market volatilities on Ford and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and United States.
Diversification Opportunities for Ford and United States
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and United is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and United States Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Commodity 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Commodity has no effect on the direction of Ford i.e., Ford and United States go up and down completely randomly.
Pair Corralation between Ford and United States
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the United States. In addition to that, Ford is 2.77 times more volatile than United States Commodity. It trades about -0.06 of its total potential returns per unit of risk. United States Commodity is currently generating about 0.05 per unit of volatility. If you would invest 6,897 in United States Commodity on December 1, 2024 and sell it today you would earn a total of 50.00 from holding United States Commodity or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. United States Commodity
Performance |
| Timeline |
| Ford Motor |
| United States Commodity |
Ford and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and United States
The main advantage of trading using opposite Ford and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.The idea behind Ford Motor and United States Commodity 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.| United States vs. KraneShares Bosera MSCI | United States vs. WisdomTree Continuous Commodity | United States vs. iPath Bloomberg Commodity | United States vs. Cambria Shareholder Yield |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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