Correlation Between Ford and VanEck IBoxx

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

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

Diversification Opportunities for Ford and VanEck IBoxx

0.15

Correlation Coefficient

Ford  VanEck IBoxx

Average diversification

The 3 months correlation between Ford and VanEck is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and VanEck iBoxx EUR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck iBoxx EUR 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 VanEck IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck iBoxx EUR has no effect on the direction of Ford i.e., Ford and VanEck IBoxx go up and down completely randomly.

Pair Corralation between Ford and VanEck IBoxx

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the VanEck IBoxx. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.02 times less risky than VanEck IBoxx. The stock trades about -0.2 of its potential returns per unit of risk. The VanEck iBoxx EUR is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,173  in VanEck iBoxx EUR on October 7, 2024 and sell it today you would earn a total of  70.00  from holding VanEck iBoxx EUR or generate 5.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Ford Motor  vs.  VanEck iBoxx EUR

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.

VanEck iBoxx EUR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck iBoxx EUR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, VanEck IBoxx is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ford and VanEck IBoxx

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

The idea behind Ford Motor and VanEck iBoxx EUR 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.