Correlation Between Fidelity Capital and Federated Short-term

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

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

Diversification Opportunities for Fidelity Capital and Federated Short-term

-0.35

Correlation Coefficient

Fidelity Capital  Federated Short-term

Very good diversification

The 3 months correlation between Fidelity and Federated is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Capital Income and Federated Short Term Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Short Term and Fidelity Capital 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 Capital Income are associated (or correlated) with Federated Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Short Term has no effect on the direction of Fidelity Capital i.e., Fidelity Capital and Federated Short-term go up and down completely randomly.

Pair Corralation between Fidelity Capital and Federated Short-term

Assuming the 90 days horizon Fidelity Capital Income is expected to under-perform the Federated Short-term. In addition to that, Fidelity Capital is 3.21 times more volatile than Federated Short Term Income. It trades about -0.01 of its total potential returns per unit of risk. Federated Short Term Income is currently generating about 0.24 per unit of volatility. If you would invest  836.00  in Federated Short Term Income on December 22, 2024 and sell it today you would earn a total of  16.00  from holding Federated Short Term Income or generate 1.91% return on investment over 90 days.

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

Fidelity Capital Income  vs.  Federated Short Term Income

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.

Federated Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Short Term Income are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Capital and Federated Short-term

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

The idea behind Fidelity Capital Income and Federated Short Term 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.