Correlation Between Ford and SPDR Series

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

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

Diversification Opportunities for Ford and SPDR Series

0.31

Correlation Coefficient

Ford  SPDR Series

Weak diversification

The 3 months correlation between Ford and SPDR is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and SPDR Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Series Trust 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 SPDR Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Series Trust has no effect on the direction of Ford i.e., Ford and SPDR Series go up and down completely randomly.

Pair Corralation between Ford and SPDR Series

Taking into account the 90-day investment horizon Ford is expected to generate 3.85 times less return on investment than SPDR Series. In addition to that, Ford is 1.27 times more volatile than SPDR Series Trust. It trades about 0.01 of its total potential returns per unit of risk. SPDR Series Trust is currently generating about 0.03 per unit of volatility. If you would invest  158,298  in SPDR Series Trust on September 29, 2024 and sell it today you would earn a total of  26,870  from holding SPDR Series Trust or generate 16.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Ford Motor  vs.  SPDR Series Trust

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.

SPDR Series Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Series Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, SPDR Series 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 SPDR Series

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

The idea behind Ford Motor and SPDR Series Trust 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.