Correlation Between Ford and Intermediate Bond

Can any of the company-specific risk be diversified away by investing in both Ford and Intermediate Bond 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 Intermediate Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and Intermediate Bond Fund, you can compare the effects of market volatilities on Ford and Intermediate Bond 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 Intermediate Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Intermediate Bond.

Diversification Opportunities for Ford and Intermediate Bond

0.01

Correlation Coefficient

Ford  Intermediate Bond

Significant diversification

The 3 months correlation between Ford and Intermediate is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Intermediate Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Bond 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 Intermediate Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Bond has no effect on the direction of Ford i.e., Ford and Intermediate Bond go up and down completely randomly.

Pair Corralation between Ford and Intermediate Bond

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Intermediate Bond. In addition to that, Ford is 8.02 times more volatile than Intermediate Bond Fund. It trades about -0.07 of its total potential returns per unit of risk. Intermediate Bond Fund is currently generating about 0.13 per unit of volatility. If you would invest  1,215  in Intermediate Bond Fund on March 12, 2024 and sell it today you would earn a total of  15.00  from holding Intermediate Bond Fund or generate 1.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Intermediate Bond Fund

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Intermediate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intermediate Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Intermediate Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Intermediate Bond

The main advantage of trading using opposite Ford and Intermediate Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Intermediate Bond 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 Intermediate Bond will offset losses from the drop in Intermediate Bond's long position.

The idea behind Ford Motor and Intermediate Bond 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.