Correlation Between Fidelity Large and College Retirement

Can any of the company-specific risk be diversified away by investing in both Fidelity Large and College Retirement 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 College Retirement 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 College Retirement Equities, you can compare the effects of market volatilities on Fidelity Large and College Retirement 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 College Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Large and College Retirement.

Diversification Opportunities for Fidelity Large and College Retirement

0.95

Correlation Coefficient

Fidelity Large  College Retirement

Almost no diversification

The 3 months correlation between Fidelity and College is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Large Cap and College Retirement Equities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on College Retirement 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 College Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of College Retirement has no effect on the direction of Fidelity Large i.e., Fidelity Large and College Retirement go up and down completely randomly.

Pair Corralation between Fidelity Large and College Retirement

Assuming the 90 days horizon Fidelity Large Cap is expected to generate 1.06 times more return on investment than College Retirement. However, Fidelity Large is 1.06 times more volatile than College Retirement Equities. It trades about -0.02 of its potential returns per unit of risk. College Retirement Equities is currently generating about -0.08 per unit of risk. If you would invest  1,562  in Fidelity Large Cap on December 22, 2024 and sell it today you would lose (21.00) from holding Fidelity Large Cap or give up 1.34% of portfolio value over 90 days.

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

Fidelity Large Cap  vs.  College Retirement Equities

Fidelity Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Large Cap has generated negative risk-adjusted returns adding no value to fund investors. 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.

College Retirement

Risk-Adjusted Performance

Very Weak

Over the last 90 days College Retirement Equities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, College Retirement 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 Large and College Retirement

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

The idea behind Fidelity Large Cap and College Retirement Equities 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.