Correlation Between Ford and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both Ford and IShares Canadian 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 Canadian 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 Canadian HYBrid, you can compare the effects of market volatilities on Ford and IShares Canadian 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 Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and IShares Canadian.
Diversification Opportunities for Ford and IShares Canadian
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and IShares is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and iShares Canadian HYBrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian HYBrid 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 Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian HYBrid has no effect on the direction of Ford i.e., Ford and IShares Canadian go up and down completely randomly.
Pair Corralation between Ford and IShares Canadian
Taking into account the 90-day investment horizon Ford Motor is expected to generate 10.76 times more return on investment than IShares Canadian. However, Ford is 10.76 times more volatile than iShares Canadian HYBrid. It trades about 0.01 of its potential returns per unit of risk. iShares Canadian HYBrid is currently generating about 0.01 per unit of risk. If you would invest 1,122 in Ford Motor on August 27, 2024 and sell it today you would lose (4.00) from holding Ford Motor or give up 0.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. iShares Canadian HYBrid
Performance |
| Timeline |
| Ford Motor |
| iShares Canadian HYBrid |
Ford and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and IShares Canadian
The main advantage of trading using opposite Ford and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, IShares Canadian 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 Canadian will offset losses from the drop in IShares Canadian's long position.The idea behind Ford Motor and iShares Canadian HYBrid 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 Canadian vs. iShares IG Corporate | IShares Canadian vs. iShares High Yield | IShares Canadian vs. iShares Floating Rate | IShares Canadian vs. iShares JP Morgan |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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