Correlation Between Ford and SPDR Bloomberg

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

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

Diversification Opportunities for Ford and SPDR Bloomberg

0.3

Correlation Coefficient

Ford  SPDR Bloomberg

Weak diversification

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

Pair Corralation between Ford and SPDR Bloomberg

Taking into account the 90-day investment horizon Ford Motor is expected to generate 7.73 times more return on investment than SPDR Bloomberg. However, Ford is 7.73 times more volatile than SPDR Bloomberg Global. It trades about 0.02 of its potential returns per unit of risk. SPDR Bloomberg Global is currently generating about -0.05 per unit of risk. If you would invest  965.00  in Ford Motor on December 17, 2024 and sell it today you would earn a total of  8.00  from holding Ford Motor or generate 0.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Ford Motor  vs.  SPDR Bloomberg Global

Ford Motor

Risk-Adjusted Performance

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. 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.

SPDR Bloomberg Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Bloomberg Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ford and SPDR Bloomberg

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

The idea behind Ford Motor and SPDR Bloomberg Global 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.