Correlation Between Ford and Dfa Investment

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

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

Diversification Opportunities for Ford and Dfa Investment

-0.63

Correlation Coefficient

Ford  Dfa Investment

Excellent diversification

The 3 months correlation between Ford and Dfa is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dfa Investment Dimensions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Investment Dimensions 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 Dfa Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Investment Dimensions has no effect on the direction of Ford i.e., Ford and Dfa Investment go up and down completely randomly.

Pair Corralation between Ford and Dfa Investment

Taking into account the 90-day investment horizon Ford Motor is expected to generate 31.57 times more return on investment than Dfa Investment. However, Ford is 31.57 times more volatile than Dfa Investment Dimensions. It trades about 0.13 of its potential returns per unit of risk. Dfa Investment Dimensions is currently generating about 0.43 per unit of risk. If you would invest  990.00  in Ford Motor on October 22, 2024 and sell it today you would earn a total of  28.00  from holding Ford Motor or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Ford Motor  vs.  Dfa Investment Dimensions

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Dfa Investment Dimensions

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Investment Dimensions are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Dfa Investment 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 Dfa Investment

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

The idea behind Ford Motor and Dfa Investment Dimensions 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.