Correlation Between Ford and Fidelity Total

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

Diversification Opportunities for Ford and Fidelity Total

0.59

Correlation Coefficient

Ford  Fidelity Total

Very weak diversification

The 3 months correlation between Ford and Fidelity is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fidelity Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Total Market 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 Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Total Market has no effect on the direction of Ford i.e., Ford and Fidelity Total go up and down completely randomly.

Pair Corralation between Ford and Fidelity Total

Taking into account the 90-day investment horizon Ford is expected to generate 2.53 times less return on investment than Fidelity Total. In addition to that, Ford is 2.72 times more volatile than Fidelity Total Market. It trades about 0.03 of its total potential returns per unit of risk. Fidelity Total Market is currently generating about 0.22 per unit of volatility. If you would invest  15,199  in Fidelity Total Market on September 3, 2024 and sell it today you would earn a total of  1,598  from holding Fidelity Total Market or generate 10.51% return on investment over 90 days.

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

Ford Motor  vs.  Fidelity Total Market

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Fidelity Total Market

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Total Market are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Total may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and Fidelity Total

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

The idea behind Ford Motor and Fidelity Total Market 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.