Correlation Between IShares Trust and Fidelity Corporate

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

By analyzing existing cross correlation between iShares Trust and Fidelity Corporate Bond, you can compare the effects of market volatilities on IShares Trust and Fidelity Corporate 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 IShares Trust with a short position of Fidelity Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Fidelity Corporate.

Diversification Opportunities for IShares Trust and Fidelity Corporate

0.89

Correlation Coefficient

IShares Trust  Fidelity Corporate

Very poor diversification

The 3 months correlation between IShares and Fidelity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Fidelity Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Corporate Bond and IShares Trust 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 iShares Trust are associated (or correlated) with Fidelity Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Corporate Bond has no effect on the direction of IShares Trust i.e., IShares Trust and Fidelity Corporate go up and down completely randomly.

Pair Corralation between IShares Trust and Fidelity Corporate

Given the investment horizon of 90 days IShares Trust is expected to generate 1.38 times less return on investment than Fidelity Corporate. But when comparing it to its historical volatility, iShares Trust is 1.08 times less risky than Fidelity Corporate. It trades about 0.05 of its potential returns per unit of risk. Fidelity Corporate Bond is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,360  in Fidelity Corporate Bond on October 3, 2024 and sell it today you would earn a total of  281.00  from holding Fidelity Corporate Bond or generate 6.44% return on investment over 90 days.

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

iShares Trust   vs.  Fidelity Corporate Bond

iShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Corporate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Corporate Bond has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Fidelity Corporate is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Trust and Fidelity Corporate

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

The idea behind iShares Trust and Fidelity Corporate Bond 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.