Correlation Between Ford and Vanguard Total

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

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

Diversification Opportunities for Ford and Vanguard Total

-0.42

Correlation Coefficient

Ford  Vanguard Total

Very good diversification

The 3 months correlation between Ford and Vanguard is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Vanguard Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total 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 Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Bond has no effect on the direction of Ford i.e., Ford and Vanguard Total go up and down completely randomly.

Pair Corralation between Ford and Vanguard Total

Taking into account the 90-day investment horizon Ford Motor is expected to generate 6.62 times more return on investment than Vanguard Total. However, Ford is 6.62 times more volatile than Vanguard Total Bond. It trades about 0.03 of its potential returns per unit of risk. Vanguard Total Bond is currently generating about -0.06 per unit of risk. If you would invest  1,083  in Ford Motor on August 31, 2024 and sell it today you would earn a total of  27.00  from holding Ford Motor or generate 2.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Vanguard Total Bond

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) 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.

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Total 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 Vanguard Total

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

The idea behind Ford Motor and Vanguard Total Bond 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.