Correlation Between GM and Fidelity Trend
Can any of the company-specific risk be diversified away by investing in both GM and Fidelity Trend 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 GM and Fidelity Trend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Fidelity Trend Fund, you can compare the effects of market volatilities on GM and Fidelity Trend 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 GM with a short position of Fidelity Trend. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fidelity Trend.
Diversification Opportunities for GM and Fidelity Trend
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Fidelity is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fidelity Trend Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Trend and GM 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 General Motors are associated (or correlated) with Fidelity Trend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Trend has no effect on the direction of GM i.e., GM and Fidelity Trend go up and down completely randomly.
Pair Corralation between GM and Fidelity Trend
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.37 times more return on investment than Fidelity Trend. However, GM is 1.37 times more volatile than Fidelity Trend Fund. It trades about 0.28 of its potential returns per unit of risk. Fidelity Trend Fund is currently generating about 0.21 per unit of risk. If you would invest 5,207 in General Motors on August 26, 2024 and sell it today you would earn a total of 646.00 from holding General Motors or generate 12.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Fidelity Trend Fund
Performance |
| Timeline |
| General Motors |
| Fidelity Trend |
GM and Fidelity Trend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Fidelity Trend
The main advantage of trading using opposite GM and Fidelity Trend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fidelity Trend 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 Trend will offset losses from the drop in Fidelity Trend's long position.The idea behind General Motors and Fidelity Trend 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.| Fidelity Trend vs. Lord Abbett Growth | Fidelity Trend vs. Fidelity Advisor Series | Fidelity Trend vs. Fidelity Advisor Growth | Fidelity Trend vs. Aquagold International |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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