Correlation Between Ford and Fidelity Sustainable
Can any of the company-specific risk be diversified away by investing in both Ford and Fidelity Sustainable 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 Fidelity Sustainable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Fidelity Sustainable World, you can compare the effects of market volatilities on Ford and Fidelity Sustainable 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 Fidelity Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Fidelity Sustainable.
Diversification Opportunities for Ford and Fidelity Sustainable
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Fidelity is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fidelity Sustainable World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Sustainable 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 Fidelity Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Sustainable has no effect on the direction of Ford i.e., Ford and Fidelity Sustainable go up and down completely randomly.
Pair Corralation between Ford and Fidelity Sustainable
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Fidelity Sustainable. In addition to that, Ford is 3.27 times more volatile than Fidelity Sustainable World. It trades about -0.01 of its total potential returns per unit of risk. Fidelity Sustainable World is currently generating about 0.11 per unit of volatility. If you would invest 4,314 in Fidelity Sustainable World on August 29, 2024 and sell it today you would earn a total of 469.00 from holding Fidelity Sustainable World or generate 10.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Ford Motor vs. Fidelity Sustainable World
Performance |
| Timeline |
| Ford Motor |
| Fidelity Sustainable |
Ford and Fidelity Sustainable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Fidelity Sustainable
The main advantage of trading using opposite Ford and Fidelity Sustainable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Fidelity Sustainable 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 Fidelity Sustainable will offset losses from the drop in Fidelity Sustainable's long position.The idea behind Ford Motor and Fidelity Sustainable World 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.| Fidelity Sustainable vs. iShares SPTSX 60 | Fidelity Sustainable vs. iShares Core SP | Fidelity Sustainable vs. iShares Core SPTSX | Fidelity Sustainable vs. BMO Aggregate Bond |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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