Correlation Between Dynamic Active and Fidelity High

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

By analyzing existing cross correlation between Dynamic Active Preferred and Fidelity High Quality, you can compare the effects of market volatilities on Dynamic Active and Fidelity High 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 Dynamic Active with a short position of Fidelity High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Active and Fidelity High.

Diversification Opportunities for Dynamic Active and Fidelity High

0.14

Correlation Coefficient

Dynamic Active  Fidelity High

Average diversification

The 3 months correlation between Dynamic and Fidelity is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Preferred and Fidelity High Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity High Quality and Dynamic Active 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 Dynamic Active Preferred are associated (or correlated) with Fidelity High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity High Quality has no effect on the direction of Dynamic Active i.e., Dynamic Active and Fidelity High go up and down completely randomly.

Pair Corralation between Dynamic Active and Fidelity High

Assuming the 90 days trading horizon Dynamic Active is expected to generate 1.27 times less return on investment than Fidelity High. But when comparing it to its historical volatility, Dynamic Active Preferred is 1.25 times less risky than Fidelity High. It trades about 0.1 of its potential returns per unit of risk. Fidelity High Quality is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,858  in Fidelity High Quality on October 9, 2024 and sell it today you would earn a total of  1,863  from holding Fidelity High Quality or generate 48.29% return on investment over 90 days.

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

Dynamic Active Preferred  vs.  Fidelity High Quality

Dynamic Active Preferred

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active Preferred are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Dynamic Active is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Fidelity High Quality

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity High Quality are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fidelity High is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dynamic Active and Fidelity High

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

The idea behind Dynamic Active Preferred and Fidelity High Quality 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 Global Correlations module to find global opportunities by holding instruments from different markets.