Correlation Between Ford and Vanguard USD

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

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

Diversification Opportunities for Ford and Vanguard USD

0.31

Correlation Coefficient

Ford  Vanguard USD

Weak diversification

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

Pair Corralation between Ford and Vanguard USD

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Vanguard USD. In addition to that, Ford is 5.56 times more volatile than Vanguard USD Treasury. It trades about -0.05 of its total potential returns per unit of risk. Vanguard USD Treasury is currently generating about 0.13 per unit of volatility. If you would invest  1,985  in Vanguard USD Treasury on September 19, 2024 and sell it today you would earn a total of  64.00  from holding Vanguard USD Treasury or generate 3.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

Ford Motor  vs.  Vanguard USD Treasury

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.

Vanguard USD Treasury

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard USD Treasury are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vanguard USD is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and Vanguard USD

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

The idea behind Ford Motor and Vanguard USD Treasury 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.