Correlation Between Ford and VONOVIA SE

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

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

Diversification Opportunities for Ford and VONOVIA SE

-0.09

Correlation Coefficient

Ford  VONOVIA SE

Good diversification

The 3 months correlation between Ford and VONOVIA is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and VONOVIA SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VONOVIA SE ADR 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 VONOVIA SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VONOVIA SE ADR has no effect on the direction of Ford i.e., Ford and VONOVIA SE go up and down completely randomly.

Pair Corralation between Ford and VONOVIA SE

Taking into account the 90-day investment horizon Ford is expected to generate 4.9 times less return on investment than VONOVIA SE. But when comparing it to its historical volatility, Ford Motor is 1.34 times less risky than VONOVIA SE. It trades about 0.01 of its potential returns per unit of risk. VONOVIA SE ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  929.00  in VONOVIA SE ADR on September 23, 2024 and sell it today you would earn a total of  481.00  from holding VONOVIA SE ADR or generate 51.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.03%
Values	Daily Returns

Ford Motor  vs.  VONOVIA SE ADR

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

VONOVIA SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VONOVIA SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ford and VONOVIA SE

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

The idea behind Ford Motor and VONOVIA SE ADR 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.