Correlation Between Ford and Fidelity Equity
Can any of the company-specific risk be diversified away by investing in both Ford and Fidelity Equity 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 Equity 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 Equity Premium, you can compare the effects of market volatilities on Ford and Fidelity Equity 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 Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Fidelity Equity.
Diversification Opportunities for Ford and Fidelity Equity
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Fidelity is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fidelity Equity Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Equity Premium 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 Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Equity Premium has no effect on the direction of Ford i.e., Ford and Fidelity Equity go up and down completely randomly.
Pair Corralation between Ford and Fidelity Equity
Taking into account the 90-day investment horizon Ford is expected to generate 44.58 times less return on investment than Fidelity Equity. But when comparing it to its historical volatility, Ford Motor is 2.51 times less risky than Fidelity Equity. It trades about 0.01 of its potential returns per unit of risk. Fidelity Equity Premium is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,861 in Fidelity Equity Premium on August 26, 2024 and sell it today you would earn a total of 862.00 from holding Fidelity Equity Premium or generate 46.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 8.05% |
| Values | Daily Returns |
Ford Motor vs. Fidelity Equity Premium
Performance |
| Timeline |
| Ford Motor |
| Fidelity Equity Premium |
Ford and Fidelity Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Fidelity Equity
The main advantage of trading using opposite Ford and Fidelity Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Fidelity Equity 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 Equity will offset losses from the drop in Fidelity Equity's long position.The idea behind Ford Motor and Fidelity Equity Premium 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 Equity vs. Global Atomic Corp | Fidelity Equity vs. enCore Energy Corp | Fidelity Equity vs. Fission Uranium Corp | Fidelity Equity vs. NexGen Energy |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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