Correlation Between Ford and Vanguard Federal

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

Diversification Opportunities for Ford and Vanguard Federal

-0.17

Correlation Coefficient

Ford  Vanguard Federal

Good diversification

The 3 months correlation between Ford and Vanguard is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Vanguard Federal Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Federal Money 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 Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Federal Money has no effect on the direction of Ford i.e., Ford and Vanguard Federal go up and down completely randomly.

Pair Corralation between Ford and Vanguard Federal

Taking into account the 90-day investment horizon Ford Motor is expected to generate 15.45 times more return on investment than Vanguard Federal. However, Ford is 15.45 times more volatile than Vanguard Federal Money. It trades about 0.06 of its potential returns per unit of risk. Vanguard Federal Money is currently generating about 0.13 per unit of risk. If you would invest  971.00  in Ford Motor on December 27, 2024 and sell it today you would earn a total of  58.00  from holding Ford Motor or generate 5.97% 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.  Vanguard Federal Money

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vanguard Federal Money

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Federal Money are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Federal 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 Federal

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

The idea behind Ford Motor and Vanguard Federal Money 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.