Correlation Between IShares Trust and Ford

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

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

Diversification Opportunities for IShares Trust and Ford

0.3

Correlation Coefficient

IShares Trust  Ford

Weak diversification

The 3 months correlation between IShares and Ford is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and IShares Trust 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 iShares Trust are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of IShares Trust i.e., IShares Trust and Ford go up and down completely randomly.

Pair Corralation between IShares Trust and Ford

Assuming the 90 days trading horizon iShares Trust is expected to generate 0.51 times more return on investment than Ford. However, iShares Trust is 1.95 times less risky than Ford. It trades about 0.08 of its potential returns per unit of risk. Ford Motor is currently generating about 0.02 per unit of risk. If you would invest  178,585  in iShares Trust on September 17, 2024 and sell it today you would earn a total of  7,786  from holding iShares Trust or generate 4.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

iShares Trust   vs.  Ford Motor

iShares Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. In spite of fairly strong primary indicators, Ford is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Trust and Ford

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

The idea behind iShares Trust and Ford Motor 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.