Correlation Between Ford and SPDR SSGA

Can any of the company-specific risk be diversified away by investing in both Ford and SPDR SSGA 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 SSGA 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 SSGA My2034, you can compare the effects of market volatilities on Ford and SPDR SSGA 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 SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and SPDR SSGA.

Diversification Opportunities for Ford and SPDR SSGA

0.2

Correlation Coefficient

Ford  SPDR SSGA

Modest diversification

The 3 months correlation between Ford and SPDR is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and SPDR SSGA My2034 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA My2034 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 SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA My2034 has no effect on the direction of Ford i.e., Ford and SPDR SSGA go up and down completely randomly.

Pair Corralation between Ford and SPDR SSGA

Taking into account the 90-day investment horizon Ford Motor is expected to generate 5.65 times more return on investment than SPDR SSGA. However, Ford is 5.65 times more volatile than SPDR SSGA My2034. It trades about 0.0 of its potential returns per unit of risk. SPDR SSGA My2034 is currently generating about -0.13 per unit of risk. If you would invest  1,071  in Ford Motor on October 8, 2024 and sell it today you would lose (83.00) from holding Ford Motor or give up 7.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	29.15%
Values	Daily Returns

Ford Motor  vs.  SPDR SSGA My2034

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.

SPDR SSGA My2034

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SSGA My2034 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, SPDR SSGA is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and SPDR SSGA

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

The idea behind Ford Motor and SPDR SSGA My2034 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.