Correlation Between Ford and IShares IBonds

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

Diversification Opportunities for Ford and IShares IBonds

-0.52

Correlation Coefficient

Ford  IShares IBonds

Excellent diversification

The 3 months correlation between Ford and IShares is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and iShares iBonds Dec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBonds Dec 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 IBonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBonds Dec has no effect on the direction of Ford i.e., Ford and IShares IBonds go up and down completely randomly.

Pair Corralation between Ford and IShares IBonds

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the IShares IBonds. In addition to that, Ford is 28.06 times more volatile than iShares iBonds Dec. It trades about -0.01 of its total potential returns per unit of risk. iShares iBonds Dec is currently generating about 0.2 per unit of volatility. If you would invest  2,264  in iShares iBonds Dec on October 1, 2024 and sell it today you would earn a total of  12.00  from holding iShares iBonds Dec or generate 0.53% return on investment over 90 days.

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

Ford Motor  vs.  iShares iBonds Dec

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.

iShares iBonds Dec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares iBonds Dec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares IBonds is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ford and IShares IBonds

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

The idea behind Ford Motor and iShares iBonds Dec 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.