Correlation Between Fidelity Asset and Financials Ultrasector

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

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

Diversification Opportunities for Fidelity Asset and Financials Ultrasector

0.15

Correlation Coefficient

Fidelity Asset  Financials Ultrasector

Average diversification

The 3 months correlation between Fidelity and Financials is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Asset Manager and Financials Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financials Ultrasector and Fidelity Asset 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 Asset Manager are associated (or correlated) with Financials Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financials Ultrasector has no effect on the direction of Fidelity Asset i.e., Fidelity Asset and Financials Ultrasector go up and down completely randomly.

Pair Corralation between Fidelity Asset and Financials Ultrasector

Assuming the 90 days horizon Fidelity Asset Manager is expected to generate 0.24 times more return on investment than Financials Ultrasector. However, Fidelity Asset Manager is 4.21 times less risky than Financials Ultrasector. It trades about -0.24 of its potential returns per unit of risk. Financials Ultrasector Profund is currently generating about -0.28 per unit of risk. If you would invest  1,201  in Fidelity Asset Manager on September 30, 2024 and sell it today you would lose (21.00) from holding Fidelity Asset Manager or give up 1.75% of portfolio value over 90 days.

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

Fidelity Asset Manager  vs.  Financials Ultrasector Profund

Fidelity Asset Manager

Risk-Adjusted Performance

0 of 100

Very Weak

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

Financials Ultrasector

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Financials Ultrasector Profund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Financials Ultrasector may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity Asset and Financials Ultrasector

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

The idea behind Fidelity Asset Manager and Financials Ultrasector Profund 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..