Correlation Between Fidelity Canadian and Fidelity High

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

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

Diversification Opportunities for Fidelity Canadian and Fidelity High

0.92

Correlation Coefficient

Fidelity Canadian  Fidelity High

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 Canadian High and Fidelity High Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity High Quality and Fidelity Canadian 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 Canadian High are associated (or correlated) with Fidelity High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity High Quality has no effect on the direction of Fidelity Canadian i.e., Fidelity Canadian and Fidelity High go up and down completely randomly.

Pair Corralation between Fidelity Canadian and Fidelity High

Assuming the 90 days trading horizon Fidelity Canadian is expected to generate 1.25 times less return on investment than Fidelity High. But when comparing it to its historical volatility, Fidelity Canadian High is 1.32 times less risky than Fidelity High. It trades about 0.21 of its potential returns per unit of risk. Fidelity High Quality is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,557  in Fidelity High Quality on September 3, 2024 and sell it today you would earn a total of  1,054  from holding Fidelity High Quality or generate 18.97% return on investment over 90 days.

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

Fidelity Canadian High  vs.  Fidelity High Quality

Fidelity Canadian High

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Canadian High are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Fidelity Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity High Quality

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity High Quality are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Fidelity High displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Canadian and Fidelity High

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

The idea behind Fidelity Canadian High and Fidelity High Quality 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.