Correlation Between Fidelity Balanced and Balanced Fund

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

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

Diversification Opportunities for Fidelity Balanced and Balanced Fund

0.99

Correlation Coefficient

Fidelity Balanced  Balanced Fund

No risk reduction

The 3 months correlation between FIDELITY and Balanced is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Balanced Fund and Balanced Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Instit and Fidelity Balanced 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 Balanced Fund are associated (or correlated) with Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Instit has no effect on the direction of Fidelity Balanced i.e., Fidelity Balanced and Balanced Fund go up and down completely randomly.

Pair Corralation between Fidelity Balanced and Balanced Fund

Assuming the 90 days horizon Fidelity Balanced Fund is expected to under-perform the Balanced Fund. In addition to that, Fidelity Balanced is 1.16 times more volatile than Balanced Fund Institutional. It trades about -0.08 of its total potential returns per unit of risk. Balanced Fund Institutional is currently generating about -0.07 per unit of volatility. If you would invest  1,956  in Balanced Fund Institutional on December 30, 2024 and sell it today you would lose (54.00) from holding Balanced Fund Institutional or give up 2.76% of portfolio value over 90 days.

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

Fidelity Balanced Fund  vs.  Balanced Fund Institutional

Fidelity Balanced

Risk-Adjusted Performance

Very Weak

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

Balanced Fund Instit

Risk-Adjusted Performance

Very Weak

Over the last 90 days Balanced Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Balanced Fund 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 Balanced and Balanced Fund

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

The idea behind Fidelity Balanced Fund and Balanced Fund Institutional 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.