Correlation Between Ford and Blockchain Technologies

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

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

Diversification Opportunities for Ford and Blockchain Technologies

0.65

Correlation Coefficient

Ford  Blockchain Technologies

Poor diversification

The 3 months correlation between Ford and Blockchain is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Blockchain Technologies ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blockchain Technologies 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 Blockchain Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blockchain Technologies has no effect on the direction of Ford i.e., Ford and Blockchain Technologies go up and down completely randomly.

Pair Corralation between Ford and Blockchain Technologies

Taking into account the 90-day investment horizon Ford is expected to generate 4.6 times less return on investment than Blockchain Technologies. But when comparing it to its historical volatility, Ford Motor is 1.16 times less risky than Blockchain Technologies. It trades about 0.02 of its potential returns per unit of risk. Blockchain Technologies ETF is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,350  in Blockchain Technologies ETF on September 4, 2024 and sell it today you would earn a total of  733.00  from holding Blockchain Technologies ETF or generate 54.3% return on investment over 90 days.

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

Ford Motor  vs.  Blockchain Technologies ETF

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Blockchain Technologies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blockchain Technologies ETF are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Blockchain Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Blockchain Technologies

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

The idea behind Ford Motor and Blockchain Technologies ETF 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.