Correlation Between Fidelity Dynamic and First Trust

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

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

Diversification Opportunities for Fidelity Dynamic and First Trust

0.78

Correlation Coefficient

Fidelity Dynamic  First Trust

Poor diversification

The 3 months correlation between Fidelity and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Dynamic Buffered and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and Fidelity Dynamic 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 Dynamic Buffered are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of Fidelity Dynamic i.e., Fidelity Dynamic and First Trust go up and down completely randomly.

Pair Corralation between Fidelity Dynamic and First Trust

Given the investment horizon of 90 days Fidelity Dynamic Buffered is expected to under-perform the First Trust. In addition to that, Fidelity Dynamic is 4.69 times more volatile than First Trust Exchange Traded. It trades about -0.01 of its total potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.49 per unit of volatility. If you would invest  3,902  in First Trust Exchange Traded on October 25, 2024 and sell it today you would earn a total of  46.00  from holding First Trust Exchange Traded or generate 1.18% return on investment over 90 days.

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

Fidelity Dynamic Buffered  vs.  First Trust Exchange Traded

Fidelity Dynamic Buffered

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Dynamic Buffered are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fidelity Dynamic is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First Trust Exchange

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Dynamic and First Trust

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

The idea behind Fidelity Dynamic Buffered and First Trust Exchange Traded 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.