Correlation Between Ford and Vanguard USD
Can any of the company-specific risk be diversified away by investing in both Ford and Vanguard USD 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 USD 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 USD Treasury, you can compare the effects of market volatilities on Ford and Vanguard USD 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 USD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Vanguard USD.
Diversification Opportunities for Ford and Vanguard USD
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Vanguard is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Vanguard USD Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard USD Treasury 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 USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard USD Treasury has no effect on the direction of Ford i.e., Ford and Vanguard USD go up and down completely randomly.
Pair Corralation between Ford and Vanguard USD
Taking into account the 90-day investment horizon Ford Motor is expected to generate 7.1 times more return on investment than Vanguard USD. However, Ford is 7.1 times more volatile than Vanguard USD Treasury. It trades about 0.18 of its potential returns per unit of risk. Vanguard USD Treasury is currently generating about 0.53 per unit of risk. If you would invest 1,022 in Ford Motor on September 4, 2024 and sell it today you would earn a total of 76.00 from holding Ford Motor or generate 7.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Vanguard USD Treasury
Performance |
| Timeline |
| Ford Motor |
| Vanguard USD Treasury |
Ford and Vanguard USD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Vanguard USD
The main advantage of trading using opposite Ford and Vanguard USD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Vanguard USD 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 USD will offset losses from the drop in Vanguard USD's long position.The idea behind Ford Motor and Vanguard USD Treasury 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 USD vs. UBSFund Solutions MSCI | Vanguard USD vs. Vanguard SP 500 | Vanguard USD vs. iShares VII PLC | Vanguard USD vs. iShares Core SP |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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