Correlation Between Columbia Large and Fidelity Mega

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

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

Diversification Opportunities for Columbia Large and Fidelity Mega

0.62

Correlation Coefficient

Columbia Large  Fidelity Mega

Poor diversification

The 3 months correlation between Columbia and Fidelity is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Large Cap and Fidelity Mega Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Mega Cap and Columbia Large 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 Large Cap are associated (or correlated) with Fidelity Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Mega Cap has no effect on the direction of Columbia Large i.e., Columbia Large and Fidelity Mega go up and down completely randomly.

Pair Corralation between Columbia Large and Fidelity Mega

Assuming the 90 days horizon Columbia Large is expected to generate 1.14 times less return on investment than Fidelity Mega. In addition to that, Columbia Large is 1.11 times more volatile than Fidelity Mega Cap. It trades about 0.1 of its total potential returns per unit of risk. Fidelity Mega Cap is currently generating about 0.12 per unit of volatility. If you would invest  1,663  in Fidelity Mega Cap on September 30, 2024 and sell it today you would earn a total of  934.00  from holding Fidelity Mega Cap or generate 56.16% return on investment over 90 days.

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

Columbia Large Cap  vs.  Fidelity Mega Cap

Columbia Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Mega Cap

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Mega Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Mega 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 Large and Fidelity Mega

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

The idea behind Columbia Large Cap and Fidelity Mega Cap 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.