Correlation Between Fidelity Large and Alger Weatherbie

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

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

Diversification Opportunities for Fidelity Large and Alger Weatherbie

0.67

Correlation Coefficient

Fidelity Large  Alger Weatherbie

Poor diversification

The 3 months correlation between Fidelity and Alger is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Large Cap and Alger Weatherbie Specialized in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Weatherbie Spe and Fidelity Large 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 Large Cap are associated (or correlated) with Alger Weatherbie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Weatherbie Spe has no effect on the direction of Fidelity Large i.e., Fidelity Large and Alger Weatherbie go up and down completely randomly.

Pair Corralation between Fidelity Large and Alger Weatherbie

Assuming the 90 days horizon Fidelity Large is expected to generate 1.43 times less return on investment than Alger Weatherbie. But when comparing it to its historical volatility, Fidelity Large Cap is 1.5 times less risky than Alger Weatherbie. It trades about 0.24 of its potential returns per unit of risk. Alger Weatherbie Specialized is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,498  in Alger Weatherbie Specialized on October 24, 2024 and sell it today you would earn a total of  84.00  from holding Alger Weatherbie Specialized or generate 5.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Fidelity Large Cap  vs.  Alger Weatherbie Specialized

Fidelity Large Cap

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Large Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Fidelity Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alger Weatherbie Spe

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Weatherbie Specialized are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Alger Weatherbie may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fidelity Large and Alger Weatherbie

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

The idea behind Fidelity Large Cap and Alger Weatherbie Specialized 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.