Correlation Between Ford and Nasdaq 100
Can any of the company-specific risk be diversified away by investing in both Ford and Nasdaq 100 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 Nasdaq 100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Nasdaq 100 Index Fund, you can compare the effects of market volatilities on Ford and Nasdaq 100 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 Nasdaq 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Nasdaq 100.
Diversification Opportunities for Ford and Nasdaq 100
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Nasdaq is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nasdaq 100 Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Index 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 Nasdaq 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Index has no effect on the direction of Ford i.e., Ford and Nasdaq 100 go up and down completely randomly.
Pair Corralation between Ford and Nasdaq 100
Taking into account the 90-day investment horizon Ford is expected to generate 1.37 times less return on investment than Nasdaq 100. In addition to that, Ford is 2.1 times more volatile than Nasdaq 100 Index Fund. It trades about 0.03 of its total potential returns per unit of risk. Nasdaq 100 Index Fund is currently generating about 0.09 per unit of volatility. If you would invest 4,078 in Nasdaq 100 Index Fund on August 25, 2024 and sell it today you would earn a total of 1,138 from holding Nasdaq 100 Index Fund or generate 27.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Nasdaq 100 Index Fund
Performance |
| Timeline |
| Ford Motor |
| Nasdaq 100 Index |
Ford and Nasdaq 100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Nasdaq 100
The main advantage of trading using opposite Ford and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Nasdaq 100 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 Nasdaq 100 will offset losses from the drop in Nasdaq 100's long position.The idea behind Ford Motor and Nasdaq 100 Index Fund 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.| Nasdaq 100 vs. Sp 500 Index | Nasdaq 100 vs. Science Technology Fund | Nasdaq 100 vs. Extended Market Index | Nasdaq 100 vs. World Growth Fund |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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