Correlation Between Ford and Fidelity Advisor
Can any of the company-specific risk be diversified away by investing in both Ford and Fidelity Advisor 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 Advisor 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 Advisor 529, you can compare the effects of market volatilities on Ford and Fidelity Advisor 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 Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Fidelity Advisor.
Diversification Opportunities for Ford and Fidelity Advisor
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ford and Fidelity is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fidelity Advisor 529 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor 529 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 Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor 529 has no effect on the direction of Ford i.e., Ford and Fidelity Advisor go up and down completely randomly.
Pair Corralation between Ford and Fidelity Advisor
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.29 times more return on investment than Fidelity Advisor. However, Ford is 2.29 times more volatile than Fidelity Advisor 529. It trades about -0.03 of its potential returns per unit of risk. Fidelity Advisor 529 is currently generating about -0.16 per unit of risk. If you would invest 1,230 in Ford Motor on January 19, 2024 and sell it today you would lose (26.00) from holding Ford Motor or give up 2.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Fidelity Advisor 529
Performance |
| Timeline |
| Ford Motor |
| Fidelity Advisor 529 |
Ford and Fidelity Advisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Fidelity Advisor
The main advantage of trading using opposite Ford and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Fidelity Advisor 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 Advisor will offset losses from the drop in Fidelity Advisor's long position.The idea behind Ford Motor and Fidelity Advisor 529 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.| Fidelity Advisor vs. Tekla Healthcare Investors | Fidelity Advisor vs. Tekla Life Sciences | Fidelity Advisor vs. Flaherty and Crumrine | Fidelity Advisor vs. Cohen And Steers |
Check out your portfolio center.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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