Correlation Between Ford and IShares Emerging

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

Diversification Opportunities for Ford and IShares Emerging

0.28

Correlation Coefficient

Ford  IShares Emerging

Modest diversification

The 3 months correlation between Ford and IShares is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and iShares Emerging Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Emerging Asia 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 Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Emerging Asia has no effect on the direction of Ford i.e., Ford and IShares Emerging go up and down completely randomly.

Pair Corralation between Ford and IShares Emerging

Taking into account the 90-day investment horizon Ford is expected to generate 3.04 times less return on investment than IShares Emerging. In addition to that, Ford is 6.92 times more volatile than iShares Emerging Asia. It trades about 0.0 of its total potential returns per unit of risk. iShares Emerging Asia is currently generating about 0.1 per unit of volatility. If you would invest  7,563  in iShares Emerging Asia on September 12, 2024 and sell it today you would earn a total of  137.00  from holding iShares Emerging Asia or generate 1.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  iShares Emerging Asia

Ford Motor

Risk-Adjusted Performance

0 of 100

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 Emerging Asia

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Emerging Asia are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Emerging 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 IShares Emerging

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

The idea behind Ford Motor and iShares Emerging Asia 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.