Correlation Between Ford and VanEck Sustainable

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

Diversification Opportunities for Ford and VanEck Sustainable

-0.06

Correlation Coefficient

Ford  VanEck Sustainable

Good diversification

The 3 months correlation between Ford and VanEck is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and VanEck Sustainable European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Sustainable 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 Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Sustainable has no effect on the direction of Ford i.e., Ford and VanEck Sustainable go up and down completely randomly.

Pair Corralation between Ford and VanEck Sustainable

Taking into account the 90-day investment horizon Ford is expected to generate 3.64 times less return on investment than VanEck Sustainable. In addition to that, Ford is 3.21 times more volatile than VanEck Sustainable European. It trades about 0.01 of its total potential returns per unit of risk. VanEck Sustainable European is currently generating about 0.07 per unit of volatility. If you would invest  5,887  in VanEck Sustainable European on September 27, 2024 and sell it today you would earn a total of  1,590  from holding VanEck Sustainable European or generate 27.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.61%
Values	Daily Returns

Ford Motor  vs.  VanEck Sustainable European

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 Sustainable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Sustainable European has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, VanEck Sustainable is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and VanEck Sustainable

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

The idea behind Ford Motor and VanEck Sustainable European 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.