Correlation Between Ford and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Ford and Vanguard Emerging 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 Vanguard Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Vanguard Emerging Markets, you can compare the effects of market volatilities on Ford and Vanguard Emerging 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 Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Vanguard Emerging.
Diversification Opportunities for Ford and Vanguard Emerging
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Vanguard is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets 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 Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Ford i.e., Ford and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Ford and Vanguard Emerging
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.12 times more return on investment than Vanguard Emerging. However, Ford is 2.12 times more volatile than Vanguard Emerging Markets. It trades about 0.01 of its potential returns per unit of risk. Vanguard Emerging Markets is currently generating about 0.03 per unit of risk. If you would invest 1,104 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 6.00 from holding Ford Motor or generate 0.54% 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. Vanguard Emerging Markets
Performance |
| Timeline |
| Ford Motor |
| Vanguard Emerging Markets |
Ford and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Vanguard Emerging
The main advantage of trading using opposite Ford and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Vanguard Emerging 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 Vanguard Emerging will offset losses from the drop in Vanguard Emerging's long position.The idea behind Ford Motor and Vanguard Emerging Markets 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.| Vanguard Emerging vs. Vanguard Developed Markets | Vanguard Emerging vs. Vanguard Reit Index | Vanguard Emerging vs. Vanguard Small Cap Index | Vanguard Emerging vs. Vanguard European Stock |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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