Correlation Between Ford and IShares ESG

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

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

Diversification Opportunities for Ford and IShares ESG

0.59

Correlation Coefficient

Ford  IShares ESG

Very weak diversification

The 3 months correlation between Ford and IShares is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and iShares ESG Screened in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Screened 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Screened has no effect on the direction of Ford i.e., Ford and IShares ESG go up and down completely randomly.

Pair Corralation between Ford and IShares ESG

Taking into account the 90-day investment horizon Ford is expected to generate 11.15 times less return on investment than IShares ESG. In addition to that, Ford is 1.87 times more volatile than iShares ESG Screened. It trades about 0.01 of its total potential returns per unit of risk. iShares ESG Screened is currently generating about 0.23 per unit of volatility. If you would invest  4,233  in iShares ESG Screened on October 25, 2024 and sell it today you would earn a total of  157.00  from holding iShares ESG Screened or generate 3.71% return on investment over 90 days.

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

Ford Motor  vs.  iShares ESG Screened

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.

iShares ESG Screened

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Screened are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking indicators, IShares ESG is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ford and IShares ESG

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

The idea behind Ford Motor and iShares ESG Screened 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.