Correlation Between Fidelity Contrafund and Dodge Balanced

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

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

Diversification Opportunities for Fidelity Contrafund and Dodge Balanced

0.4

Correlation Coefficient

Fidelity Contrafund  Dodge Balanced

Very weak diversification

The 3 months correlation between Fidelity and Dodge is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Contrafund and Dodge Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Balanced and Fidelity Contrafund 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 Contrafund are associated (or correlated) with Dodge Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Balanced has no effect on the direction of Fidelity Contrafund i.e., Fidelity Contrafund and Dodge Balanced go up and down completely randomly.

Pair Corralation between Fidelity Contrafund and Dodge Balanced

Assuming the 90 days horizon Fidelity Contrafund is expected to generate 1.13 times more return on investment than Dodge Balanced. However, Fidelity Contrafund is 1.13 times more volatile than Dodge Balanced Fund. It trades about 0.01 of its potential returns per unit of risk. Dodge Balanced Fund is currently generating about -0.13 per unit of risk. If you would invest  2,101  in Fidelity Contrafund on September 21, 2024 and sell it today you would earn a total of  1.00  from holding Fidelity Contrafund or generate 0.05% return on investment over 90 days.

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

Fidelity Contrafund  vs.  Dodge Balanced Fund

Fidelity Contrafund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dodge Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodge Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Fidelity Contrafund and Dodge Balanced

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

The idea behind Fidelity Contrafund and Dodge Balanced Fund 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.