Correlation Between Ford and Dfa Target

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

Diversification Opportunities for Ford and Dfa Target

-0.55

Correlation Coefficient

Ford  Dfa Target

Excellent diversification

The 3 months correlation between Ford and Dfa is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dfa Target Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Target Value 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Target Value has no effect on the direction of Ford i.e., Ford and Dfa Target go up and down completely randomly.

Pair Corralation between Ford and Dfa Target

Taking into account the 90-day investment horizon Ford is expected to generate 1.59 times less return on investment than Dfa Target. In addition to that, Ford is 1.63 times more volatile than Dfa Target Value. It trades about 0.01 of its total potential returns per unit of risk. Dfa Target Value is currently generating about 0.03 per unit of volatility. If you would invest  2,701  in Dfa Target Value on September 24, 2024 and sell it today you would earn a total of  102.00  from holding Dfa Target Value or generate 3.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	23.34%
Values	Daily Returns

Ford Motor  vs.  Dfa Target Value

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Dfa Target Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dfa Target Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dfa Target 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 Target

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

The idea behind Ford Motor and Dfa Target Value 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.