Correlation Between Ford and IShares Global

Can any of the company-specific risk be diversified away by investing in both Ford and IShares Global 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 Global 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 Global Financials, you can compare the effects of market volatilities on Ford and IShares Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and IShares Global.

Diversification Opportunities for Ford and IShares Global

0.45

Correlation Coefficient

Ford  IShares Global

Very weak diversification

The 3 months correlation between Ford and IShares is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and iShares Global Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Financials 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Financials has no effect on the direction of Ford i.e., Ford and IShares Global go up and down completely randomly.

Pair Corralation between Ford and IShares Global

Taking into account the 90-day investment horizon Ford is expected to generate 2.5 times less return on investment than IShares Global. In addition to that, Ford is 3.1 times more volatile than iShares Global Financials. It trades about 0.03 of its total potential returns per unit of risk. iShares Global Financials is currently generating about 0.22 per unit of volatility. If you would invest  8,122  in iShares Global Financials on February 17, 2024 and sell it today you would earn a total of  730.00  from holding iShares Global Financials or generate 8.99% return on investment over 90 days.

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

Ford Motor  vs.  iShares Global Financials

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares Global Financials

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Financials are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, IShares Global may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Ford and IShares Global

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

The idea behind Ford Motor and iShares Global Financials 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.