Correlation Between Ford and SPDR SPASX

Can any of the company-specific risk be diversified away by investing in both Ford and SPDR SPASX 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 SPASX 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 SPASX 200, you can compare the effects of market volatilities on Ford and SPDR SPASX 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 SPASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and SPDR SPASX.

Diversification Opportunities for Ford and SPDR SPASX

0.03

Correlation Coefficient

Ford  SPDR SPASX

Significant diversification

The 3 months correlation between Ford and SPDR is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and SPDR SPASX 200 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SPASX 200 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 SPASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SPASX 200 has no effect on the direction of Ford i.e., Ford and SPDR SPASX go up and down completely randomly.

Pair Corralation between Ford and SPDR SPASX

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.76 times more return on investment than SPDR SPASX. However, Ford is 1.76 times more volatile than SPDR SPASX 200. It trades about 0.14 of its potential returns per unit of risk. SPDR SPASX 200 is currently generating about 0.13 per unit of risk. If you would invest  1,022  in Ford Motor on September 5, 2024 and sell it today you would earn a total of  60.00  from holding Ford Motor or generate 5.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Ford Motor  vs.  SPDR SPASX 200

Ford Motor

Risk-Adjusted Performance

1 of 100

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 SPASX 200

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SPASX 200 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, SPDR SPASX is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and SPDR SPASX

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

The idea behind Ford Motor and SPDR SPASX 200 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.