Correlation Between Ford and Foreign Bond

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

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

Diversification Opportunities for Ford and Foreign Bond

0.4

Correlation Coefficient

Ford  Foreign Bond

Very weak diversification

The 3 months correlation between Ford and Foreign is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Foreign Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Bond 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 Foreign Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Bond has no effect on the direction of Ford i.e., Ford and Foreign Bond go up and down completely randomly.

Pair Corralation between Ford and Foreign Bond

Taking into account the 90-day investment horizon Ford Motor is expected to generate 5.16 times more return on investment than Foreign Bond. However, Ford is 5.16 times more volatile than Foreign Bond Fund. It trades about 0.05 of its potential returns per unit of risk. Foreign Bond Fund is currently generating about 0.18 per unit of risk. If you would invest  958.00  in Ford Motor on February 3, 2025 and sell it today you would earn a total of  70.00  from holding Ford Motor or generate 7.31% 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.  Foreign Bond Fund

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 June 2025.

Foreign Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Foreign Bond Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Foreign Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Foreign Bond

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

The idea behind Ford Motor and Foreign Bond Fund 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.