Correlation Between Automotive Portfolio and Fidelity Natural

Can any of the company-specific risk be diversified away by investing in both Automotive Portfolio and Fidelity Natural 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 Automotive Portfolio and Fidelity Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Automotive Portfolio Automotive and Fidelity Natural Resources, you can compare the effects of market volatilities on Automotive Portfolio and Fidelity Natural 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 Automotive Portfolio with a short position of Fidelity Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automotive Portfolio and Fidelity Natural.

Diversification Opportunities for Automotive Portfolio and Fidelity Natural

0.49

Correlation Coefficient

Automotive Portfolio  Fidelity Natural

Very weak diversification

The 3 months correlation between Automotive and Fidelity is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Automotive Portfolio Automotiv and Fidelity Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Natural Res and Automotive Portfolio 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 Automotive Portfolio Automotive are associated (or correlated) with Fidelity Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Natural Res has no effect on the direction of Automotive Portfolio i.e., Automotive Portfolio and Fidelity Natural go up and down completely randomly.

Pair Corralation between Automotive Portfolio and Fidelity Natural

Assuming the 90 days horizon Automotive Portfolio Automotive is expected to generate 1.11 times more return on investment than Fidelity Natural. However, Automotive Portfolio is 1.11 times more volatile than Fidelity Natural Resources. It trades about 0.17 of its potential returns per unit of risk. Fidelity Natural Resources is currently generating about 0.09 per unit of risk. If you would invest  5,053  in Automotive Portfolio Automotive on September 6, 2024 and sell it today you would earn a total of  608.00  from holding Automotive Portfolio Automotive or generate 12.03% return on investment over 90 days.

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

Automotive Portfolio Automotiv  vs.  Fidelity Natural Resources

Automotive Portfolio

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automotive Portfolio Automotive are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Automotive Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Natural Res

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Natural Resources are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Automotive Portfolio and Fidelity Natural

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

The idea behind Automotive Portfolio Automotive and Fidelity Natural Resources 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 Transaction History module to view history of all your transactions and understand their impact on performance.