Correlation Between Fidelity Contrafund and Free Market

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

By analyzing existing cross correlation between Fidelity Contrafund and Free Market International, you can compare the effects of market volatilities on Fidelity Contrafund and Free Market 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 Free Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Contrafund and Free Market.

Diversification Opportunities for Fidelity Contrafund and Free Market

0.58

Correlation Coefficient

Fidelity Contrafund  Free Market

Very weak diversification

The 3 months correlation between Fidelity and Free is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Contrafund and Free Market International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Free Market International 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 Free Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Free Market International has no effect on the direction of Fidelity Contrafund i.e., Fidelity Contrafund and Free Market go up and down completely randomly.

Pair Corralation between Fidelity Contrafund and Free Market

Assuming the 90 days horizon Fidelity Contrafund is expected to under-perform the Free Market. In addition to that, Fidelity Contrafund is 1.68 times more volatile than Free Market International. It trades about -0.09 of its total potential returns per unit of risk. Free Market International is currently generating about 0.08 per unit of volatility. If you would invest  1,170  in Free Market International on December 4, 2024 and sell it today you would earn a total of  40.00  from holding Free Market International or generate 3.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Fidelity Contrafund  vs.  Free Market International

Fidelity Contrafund

Risk-Adjusted Performance

Very Weak

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

Free Market International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Free Market International are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Free Market 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 Contrafund and Free Market

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

The idea behind Fidelity Contrafund and Free Market International 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.