# Correlation Between Ford and DOW

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

### Specify exactly 2 symbols:F^DJIAdd Two Equities

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

## Diversification Opportunities for Ford and DOW

 0.72 Correlation Coefficient Ford Motor DOW

### Poor diversification

The 12 months correlation between Ford and DOW is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW 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 DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of Ford i.e., Ford and DOW go up and down completely randomly.

## Pair Corralation between Ford and DOW

Taking into account the 90-day investment horizon Ford Motor is expected to generate 3.42 times more return on investment than DOW. However, Ford is 3.42 times more volatile than DOW. It trades about 0.11 of its potential returns per unit of risk. DOW is currently generating about 0.06 per unit of risk. If you would invest  1,113  in Ford Motor on October 23, 2021 and sell it today you would earn a total of  995.00  from holding Ford Motor or generate 89.4% return on investment over 90 days.
 Time Period 12 Months [change] Direction Moves Together Strength Significant Accuracy 100.0% Values Daily Returns

## Ford Motor  vs.  DOW

 Performance (%)
 Timeline

## Ford and DOW Volatility Contrast

 Predicted Return Density
 Returns

## DOW

### Pair trading matchups for DOW

 Total Intl vs. DOW Total Stock vs. DOW FTSE EM vs. DOW Fidelity 500 vs. DOW Fidelity Total vs. DOW FTSE All-World vs. DOW Fidelity International vs. DOW Fidelity Total vs. DOW Alphabet vs. DOW Vanguard Index vs. DOW GM vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.

## Pair Trading with Ford and DOW

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

## Ford Motor

### Pair trading matchups for Ford

The idea behind Ford Motor and DOW 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.

## DOW

### Pair trading matchups for DOW

 Total Intl vs. DOW Fidelity International vs. DOW GM vs. DOW FTSE All-World vs. DOW Citigroup vs. DOW Advantage Solutions vs. DOW Total Stock vs. DOW Fidelity 500 vs. DOW Microsoft Corp vs. DOW Alphabet vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

## Other Complementary Tools

 Focused OpportunitiesBuild portfolios using our predefined set of ideas and optimize them against your investing preferences Go Fundamental AnalysisView fundamental data based on most recent published financial statements Go Idea OptimizerUse advanced portfolio builder with pre-computed micro ideas to build optimal portfolio Go Competition AnalyzerAnalyze and compare many basic indicators for a group of related or unrelated entities Go Aroon OscillatorAnalyze current equity momentum using Aroon Oscillator and other momentum ratios Go Price Exposure ProbabilityAnalyze equity upside and downside potential for a given time horizon across multiple markets Go Idea BreakdownAnalyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes Go Cryptocurrency CenterBuild and monitor diversified portfolio of extremely risky digital assets and cryptocurrency Go Probability Of BankruptcyGet analysis of equity chance of financial distress in the next 2 years Go Global Markets MapGet a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes Go Equity SearchSearch for actively traded equities including funds and ETFs from over 30 global markets Go