Correlation Between Fidelity Large and Transamerica Large

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

Diversification Opportunities for Fidelity Large and Transamerica Large

0.65

Correlation Coefficient

Fidelity Large  Transamerica Large

Poor diversification

The 3 months correlation between Fidelity and Transamerica is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Large Cap and Transamerica Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Cap 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 Transamerica Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Large Cap has no effect on the direction of Fidelity Large i.e., Fidelity Large and Transamerica Large go up and down completely randomly.

Pair Corralation between Fidelity Large and Transamerica Large

Assuming the 90 days horizon Fidelity Large Cap is expected to generate 1.03 times more return on investment than Transamerica Large. However, Fidelity Large is 1.03 times more volatile than Transamerica Large Cap. It trades about 0.1 of its potential returns per unit of risk. Transamerica Large Cap is currently generating about 0.06 per unit of risk. If you would invest  1,138  in Fidelity Large Cap on October 24, 2024 and sell it today you would earn a total of  482.00  from holding Fidelity Large Cap or generate 42.36% return on investment over 90 days.

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

Fidelity Large Cap  vs.  Transamerica Large Cap

Fidelity Large Cap

Risk-Adjusted Performance

7 of 100

OK

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.

Transamerica Large Cap

Risk-Adjusted Performance

0 of 100

Weak

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

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

The idea behind Fidelity Large Cap and Transamerica Large Cap 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.