Correlation Between Ford and Nationwide Bond

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

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

Diversification Opportunities for Ford and Nationwide Bond

-0.05

Correlation Coefficient

Ford  Nationwide Bond

Good diversification

The 3 months correlation between Ford and Nationwide is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nationwide Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Bond 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 Nationwide Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Bond has no effect on the direction of Ford i.e., Ford and Nationwide Bond go up and down completely randomly.

Pair Corralation between Ford and Nationwide Bond

Taking into account the 90-day investment horizon Ford Motor is expected to generate 8.53 times more return on investment than Nationwide Bond. However, Ford is 8.53 times more volatile than Nationwide Bond Fund. It trades about 0.05 of its potential returns per unit of risk. Nationwide Bond Fund is currently generating about 0.08 per unit of risk. If you would invest  957.00  in Ford Motor on December 20, 2024 and sell it today you would earn a total of  44.00  from holding Ford Motor or generate 4.6% 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.  Nationwide Bond Fund

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 3 (%) 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.

Nationwide Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide Bond Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Nationwide Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Nationwide Bond

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

The idea behind Ford Motor and Nationwide Bond Fund 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.