Correlation Between Ford and Xtrackers MSCI

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

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

Diversification Opportunities for Ford and Xtrackers MSCI

-0.09

Correlation Coefficient

Ford  Xtrackers MSCI

Good diversification

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

Pair Corralation between Ford and Xtrackers MSCI

Taking into account the 90-day investment horizon Ford is expected to generate 1.8 times less return on investment than Xtrackers MSCI. In addition to that, Ford is 2.45 times more volatile than Xtrackers MSCI EMU. It trades about 0.06 of its total potential returns per unit of risk. Xtrackers MSCI EMU is currently generating about 0.24 per unit of volatility. If you would invest  7,286  in Xtrackers MSCI EMU on December 19, 2024 and sell it today you would earn a total of  858.00  from holding Xtrackers MSCI EMU or generate 11.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Ford Motor  vs.  Xtrackers MSCI EMU

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.

Xtrackers MSCI EMU

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI EMU are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Xtrackers MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ford and Xtrackers MSCI

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

The idea behind Ford Motor and Xtrackers MSCI EMU 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.