Correlation Between Ford and IShares High

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

Diversification Opportunities for Ford and IShares High

-0.26

Correlation Coefficient

Ford  IShares High

Very good diversification

The 3 months correlation between Ford and IShares is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and iShares High Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares High Quality 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares High Quality has no effect on the direction of Ford i.e., Ford and IShares High go up and down completely randomly.

Pair Corralation between Ford and IShares High

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the IShares High. In addition to that, Ford is 5.33 times more volatile than iShares High Quality. It trades about -0.09 of its total potential returns per unit of risk. iShares High Quality is currently generating about 0.08 per unit of volatility. If you would invest  1,909  in iShares High Quality on December 1, 2024 and sell it today you would earn a total of  29.00  from holding iShares High Quality or generate 1.52% 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.  iShares High Quality

Ford Motor

Risk-Adjusted Performance

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 High Quality

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares High Quality are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares High is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and IShares High

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

The idea behind Ford Motor and iShares High Quality 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.