Correlation Between Ford and Fidelity America

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

Diversification Opportunities for Ford and Fidelity America

0.03

Correlation Coefficient

Ford  Fidelity America

Significant diversification

The 3 months correlation between Ford and Fidelity is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fidelity America AD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity America 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 America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity America has no effect on the direction of Ford i.e., Ford and Fidelity America go up and down completely randomly.

Pair Corralation between Ford and Fidelity America

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Fidelity America. In addition to that, Ford is 2.26 times more volatile than Fidelity America AD. It trades about -0.07 of its total potential returns per unit of risk. Fidelity America AD is currently generating about 0.14 per unit of volatility. If you would invest  1,518  in Fidelity America AD on October 26, 2024 and sell it today you would earn a total of  110.00  from holding Fidelity America AD or generate 7.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Ford Motor  vs.  Fidelity America AD

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 America

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity America AD are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, Fidelity America may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ford and Fidelity America

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

The idea behind Ford Motor and Fidelity America AD 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.