Correlation Between Ford and IShares Focused

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

Diversification Opportunities for Ford and IShares Focused

-0.25

Correlation Coefficient

Ford  IShares Focused

Very good diversification

The 3 months correlation between Ford and IShares is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and iShares Focused Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Focused 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 IShares Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Focused Value has no effect on the direction of Ford i.e., Ford and IShares Focused go up and down completely randomly.

Pair Corralation between Ford and IShares Focused

Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.21 times more return on investment than IShares Focused. However, Ford is 2.21 times more volatile than iShares Focused Value. It trades about 0.06 of its potential returns per unit of risk. iShares Focused Value is currently generating about 0.01 per unit of risk. If you would invest  971.00  in Ford Motor on December 27, 2024 and sell it today you would earn a total of  58.00  from holding Ford Motor or generate 5.97% return on investment over 90 days.

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

Ford Motor  vs.  iShares Focused Value

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares Focused Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Focused Value has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares Focused is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ford and IShares Focused

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

The idea behind Ford Motor and iShares Focused 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.