Correlation Between Ford and Fidelity Growth
Can any of the company-specific risk be diversified away by investing in both Ford and Fidelity Growth 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 Growth 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 Growth Discovery, you can compare the effects of market volatilities on Ford and Fidelity Growth 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 Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Fidelity Growth.
Diversification Opportunities for Ford and Fidelity Growth
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Fidelity is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fidelity Growth Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Growth Discovery 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 Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Growth Discovery has no effect on the direction of Ford i.e., Ford and Fidelity Growth go up and down completely randomly.
Pair Corralation between Ford and Fidelity Growth
Taking into account the 90-day investment horizon Ford is expected to generate 4.0 times less return on investment than Fidelity Growth. In addition to that, Ford is 2.14 times more volatile than Fidelity Growth Discovery. It trades about 0.01 of its total potential returns per unit of risk. Fidelity Growth Discovery is currently generating about 0.08 per unit of volatility. If you would invest 4,268 in Fidelity Growth Discovery on September 2, 2024 and sell it today you would earn a total of 2,211 from holding Fidelity Growth Discovery or generate 51.8% 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. Fidelity Growth Discovery
Performance |
| Timeline |
| Ford Motor |
| Fidelity Growth Discovery |
Ford and Fidelity Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Fidelity Growth
The main advantage of trading using opposite Ford and Fidelity Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Fidelity Growth 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 Growth will offset losses from the drop in Fidelity Growth's long position.The idea behind Ford Motor and Fidelity Growth Discovery 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 Growth vs. Fidelity Focused Stock | Fidelity Growth vs. Fidelity Trend Fund | Fidelity Growth vs. Fidelity Mega Cap | Fidelity Growth vs. Fidelity Value Discovery |
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 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.
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