Correlation Between Ford and Xtrackers FTSE
Can any of the company-specific risk be diversified away by investing in both Ford and Xtrackers FTSE 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 Xtrackers FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Xtrackers FTSE 250, you can compare the effects of market volatilities on Ford and Xtrackers FTSE 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 Xtrackers FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Xtrackers FTSE.
Diversification Opportunities for Ford and Xtrackers FTSE
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Xtrackers is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Xtrackers FTSE 250 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE 250 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 Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE 250 has no effect on the direction of Ford i.e., Ford and Xtrackers FTSE go up and down completely randomly.
Pair Corralation between Ford and Xtrackers FTSE
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Xtrackers FTSE. In addition to that, Ford is 2.55 times more volatile than Xtrackers FTSE 250. It trades about 0.0 of its total potential returns per unit of risk. Xtrackers FTSE 250 is currently generating about 0.04 per unit of volatility. If you would invest 171,780 in Xtrackers FTSE 250 on August 31, 2024 and sell it today you would earn a total of 23,480 from holding Xtrackers FTSE 250 or generate 13.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Ford Motor vs. Xtrackers FTSE 250
Performance |
| Timeline |
| Ford Motor |
| Xtrackers FTSE 250 |
Ford and Xtrackers FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Xtrackers FTSE
The main advantage of trading using opposite Ford and Xtrackers FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Xtrackers FTSE 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 Xtrackers FTSE will offset losses from the drop in Xtrackers FTSE's long position.The idea behind Ford Motor and Xtrackers FTSE 250 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.| Xtrackers FTSE vs. GraniteShares 3x Short | Xtrackers FTSE vs. WisdomTree Natural Gas | Xtrackers FTSE vs. Leverage Shares 3x | Xtrackers FTSE vs. WisdomTree Natural Gas |
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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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