Correlation Between Ford and Fidelity China
Can any of the company-specific risk be diversified away by investing in both Ford and Fidelity China 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 China 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 China Region, you can compare the effects of market volatilities on Ford and Fidelity China 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 China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Fidelity China.
Diversification Opportunities for Ford and Fidelity China
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Fidelity is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fidelity China Region in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity China Region 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 China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity China Region has no effect on the direction of Ford i.e., Ford and Fidelity China go up and down completely randomly.
Pair Corralation between Ford and Fidelity China
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.37 times more return on investment than Fidelity China. However, Ford is 1.37 times more volatile than Fidelity China Region. It trades about 0.08 of its potential returns per unit of risk. Fidelity China Region is currently generating about -0.08 per unit of risk. If you would invest 1,042 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 68.00 from holding Ford Motor or generate 6.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Ford Motor vs. Fidelity China Region
Performance |
| Timeline |
| Ford Motor |
| Fidelity China Region |
Ford and Fidelity China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Fidelity China
The main advantage of trading using opposite Ford and Fidelity China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Fidelity China 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 China will offset losses from the drop in Fidelity China's long position.The idea behind Ford Motor and Fidelity China Region 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 China vs. Fidelity Emerging Asia | Fidelity China vs. Fidelity Emerging Markets | Fidelity China vs. Fidelity Canada Fund | Fidelity China vs. Fidelity Pacific Basin |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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