Correlation Between Ford and Fidelity Canadian

Can any of the company-specific risk be diversified away by investing in both Ford and Fidelity Canadian 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 Canadian 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 Canadian Monthly, you can compare the effects of market volatilities on Ford and Fidelity Canadian 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 Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Fidelity Canadian.

Diversification Opportunities for Ford and Fidelity Canadian

-0.13

Correlation Coefficient

Ford  Fidelity Canadian

Good diversification

The 3 months correlation between Ford and Fidelity is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fidelity Canadian Monthly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Canadian Monthly 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 Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Canadian Monthly has no effect on the direction of Ford i.e., Ford and Fidelity Canadian go up and down completely randomly.

Pair Corralation between Ford and Fidelity Canadian

Taking into account the 90-day investment horizon Ford is expected to generate 3.11 times less return on investment than Fidelity Canadian. In addition to that, Ford is 5.47 times more volatile than Fidelity Canadian Monthly. It trades about 0.01 of its total potential returns per unit of risk. Fidelity Canadian Monthly is currently generating about 0.09 per unit of volatility. If you would invest  1,094  in Fidelity Canadian Monthly on September 30, 2024 and sell it today you would earn a total of  222.00  from holding Fidelity Canadian Monthly or generate 20.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Fidelity Canadian Monthly

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Fidelity Canadian Monthly

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Canadian Monthly are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fidelity Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Fidelity Canadian

The main advantage of trading using opposite Ford and Fidelity Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Fidelity Canadian 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 Canadian will offset losses from the drop in Fidelity Canadian's long position.

The idea behind Ford Motor and Fidelity Canadian Monthly 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.