Correlation Between Fidelity Blue and Fidelity Value

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

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

Diversification Opportunities for Fidelity Blue and Fidelity Value

0.92

Correlation Coefficient

Fidelity Blue  Fidelity Value

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Blue Chip and Fidelity Value Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Value Discovery and Fidelity Blue 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 Blue Chip are associated (or correlated) with Fidelity Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Value Discovery has no effect on the direction of Fidelity Blue i.e., Fidelity Blue and Fidelity Value go up and down completely randomly.

Pair Corralation between Fidelity Blue and Fidelity Value

Assuming the 90 days horizon Fidelity Blue Chip is expected to under-perform the Fidelity Value. In addition to that, Fidelity Blue is 1.07 times more volatile than Fidelity Value Discovery. It trades about -0.22 of its total potential returns per unit of risk. Fidelity Value Discovery is currently generating about -0.09 per unit of volatility. If you would invest  3,875  in Fidelity Value Discovery on December 1, 2024 and sell it today you would lose (142.00) from holding Fidelity Value Discovery or give up 3.66% of portfolio value over 90 days.

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

Fidelity Blue Chip  vs.  Fidelity Value Discovery

Fidelity Blue Chip

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Blue Chip has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Fidelity Value Discovery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Value Discovery has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Fidelity Value 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 Blue and Fidelity Value

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

The idea behind Fidelity Blue Chip and Fidelity Value Discovery 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.