Correlation Between Ford and Fidelity Europe

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

Diversification Opportunities for Ford and Fidelity Europe

0.04

Correlation Coefficient

Ford  Fidelity Europe

Significant diversification

The 3 months correlation between Ford and Fidelity is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fidelity Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Europe Quality 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 Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Europe Quality has no effect on the direction of Ford i.e., Ford and Fidelity Europe go up and down completely randomly.

Pair Corralation between Ford and Fidelity Europe

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Fidelity Europe. In addition to that, Ford is 2.19 times more volatile than Fidelity Europe Quality. It trades about -0.22 of its total potential returns per unit of risk. Fidelity Europe Quality is currently generating about 0.01 per unit of volatility. If you would invest  797.00  in Fidelity Europe Quality on October 11, 2024 and sell it today you would earn a total of  2.00  from holding Fidelity Europe Quality or generate 0.25% return on investment over 90 days.

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

Ford Motor  vs.  Fidelity Europe Quality

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Fidelity Europe Quality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Europe Quality has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fidelity Europe is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and Fidelity Europe

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

The idea behind Ford Motor and Fidelity Europe Quality 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.