Correlation Between Columbia Growth and Fidelity Capital

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

By analyzing existing cross correlation between Columbia Growth 529 and Fidelity Capital Income, you can compare the effects of market volatilities on Columbia Growth and Fidelity Capital 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 Columbia Growth with a short position of Fidelity Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Growth and Fidelity Capital.

Diversification Opportunities for Columbia Growth and Fidelity Capital

0.92

Correlation Coefficient

Columbia Growth  Fidelity Capital

Almost no diversification

The 3 months correlation between Columbia and Fidelity is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Growth 529 and Fidelity Capital Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Capital Income and Columbia Growth 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 Columbia Growth 529 are associated (or correlated) with Fidelity Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Capital Income has no effect on the direction of Columbia Growth i.e., Columbia Growth and Fidelity Capital go up and down completely randomly.

Pair Corralation between Columbia Growth and Fidelity Capital

Assuming the 90 days horizon Columbia Growth 529 is expected to under-perform the Fidelity Capital. In addition to that, Columbia Growth is 1.79 times more volatile than Fidelity Capital Income. It trades about -0.03 of its total potential returns per unit of risk. Fidelity Capital Income is currently generating about -0.01 per unit of volatility. If you would invest  1,007  in Fidelity Capital Income on December 23, 2024 and sell it today you would lose (4.00) from holding Fidelity Capital Income or give up 0.4% of portfolio value over 90 days.

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

Columbia Growth 529  vs.  Fidelity Capital Income

Columbia Growth 529

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Growth 529 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Columbia Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Capital Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Capital Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Fidelity Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Columbia Growth and Fidelity Capital

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

The idea behind Columbia Growth 529 and Fidelity Capital Income 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.