Correlation Between Fidelity Total and Carvana Co

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Can any of the company-specific risk be diversified away by investing in both Fidelity Total and Carvana Co 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 Fidelity Total and Carvana Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Total Market and Carvana Co Cl, you can compare the effects of market volatilities on Fidelity Total and Carvana Co 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 Fidelity Total with a short position of Carvana Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Total and Carvana Co.

Diversification Opportunities for Fidelity Total and Carvana Co

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Fidelity and Carvana is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Total Market and Carvana Co Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana Co Cl and Fidelity Total 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 Fidelity Total Market are associated (or correlated) with Carvana Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana Co Cl has no effect on the direction of Fidelity Total i.e., Fidelity Total and Carvana Co go up and down completely randomly.

Pair Corralation between Fidelity Total and Carvana Co

Assuming the 90 days horizon Fidelity Total Market is expected to generate 0.22 times more return on investment than Carvana Co. However, Fidelity Total Market is 4.52 times less risky than Carvana Co. It trades about 0.05 of its potential returns per unit of risk. Carvana Co Cl is currently generating about -0.02 per unit of risk. If you would invest  1,068  in Fidelity Total Market on February 24, 2022 and sell it today you would earn a total of  322.00  from holding Fidelity Total Market or generate 30.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.8%
ValuesDaily Returns

Fidelity Total Market  vs.  Carvana Co Cl

 Performance (%) 
      Timeline 
Fidelity Total Market 
Fidelity Performance
0 of 100
Over the last 90 days Fidelity Total Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Fidelity Price Channel

Carvana Co Cl 
Carvana Performance
0 of 100
Over the last 90 days Carvana Co Cl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Carvana Price Channel

Fidelity Total and Carvana Co Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Fidelity Total and Carvana Co

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

Fidelity Total Market

Pair trading matchups for Fidelity Total

The idea behind Fidelity Total Market and Carvana Co Cl 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.
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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