Correlation Between Fidelity Contrafund and Westwood Largecap

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

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

Diversification Opportunities for Fidelity Contrafund and Westwood Largecap

0.74

Correlation Coefficient

Fidelity Contrafund  Westwood Largecap

Poor diversification

The 3 months correlation between Fidelity and Westwood is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Contrafund and Westwood Largecap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Largecap Value 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 Westwood Largecap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Largecap Value has no effect on the direction of Fidelity Contrafund i.e., Fidelity Contrafund and Westwood Largecap go up and down completely randomly.

Pair Corralation between Fidelity Contrafund and Westwood Largecap

Assuming the 90 days horizon Fidelity Contrafund is expected to generate 0.91 times more return on investment than Westwood Largecap. However, Fidelity Contrafund is 1.1 times less risky than Westwood Largecap. It trades about 0.12 of its potential returns per unit of risk. Westwood Largecap Value is currently generating about -0.05 per unit of risk. If you would invest  2,056  in Fidelity Contrafund on September 14, 2024 and sell it today you would earn a total of  137.00  from holding Fidelity Contrafund or generate 6.66% return on investment over 90 days.

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

Fidelity Contrafund  vs.  Westwood Largecap Value

Fidelity Contrafund

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Contrafund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Contrafund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Westwood Largecap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westwood Largecap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Westwood Largecap 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 Westwood Largecap

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

The idea behind Fidelity Contrafund and Westwood Largecap Value 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.