Correlation Between Ford and Fidelity Value

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

Diversification Opportunities for Ford and Fidelity Value

-0.23

Correlation Coefficient

Ford  Fidelity Value

Very good diversification

The 3 months correlation between Ford and Fidelity is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fidelity Value ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Value ETF 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 Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Value ETF has no effect on the direction of Ford i.e., Ford and Fidelity Value go up and down completely randomly.

Pair Corralation between Ford and Fidelity Value

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Fidelity Value. In addition to that, Ford is 2.15 times more volatile than Fidelity Value ETF. It trades about -0.05 of its total potential returns per unit of risk. Fidelity Value ETF is currently generating about 0.19 per unit of volatility. If you would invest  1,900  in Fidelity Value ETF on October 25, 2024 and sell it today you would earn a total of  216.00  from holding Fidelity Value ETF or generate 11.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Ford Motor  vs.  Fidelity Value ETF

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 Value ETF

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Value ETF are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Fidelity Value may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ford and Fidelity Value

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

The idea behind Ford Motor and Fidelity Value ETF 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.