Correlation Between Fidelity Sustainable and Fidelity Momentum

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

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

Diversification Opportunities for Fidelity Sustainable and Fidelity Momentum

0.97

Correlation Coefficient

Fidelity Sustainable  Fidelity Momentum

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Sustainable World and Fidelity Momentum ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Momentum ETF and Fidelity Sustainable 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 Sustainable World are associated (or correlated) with Fidelity Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Momentum ETF has no effect on the direction of Fidelity Sustainable i.e., Fidelity Sustainable and Fidelity Momentum go up and down completely randomly.

Pair Corralation between Fidelity Sustainable and Fidelity Momentum

Assuming the 90 days trading horizon Fidelity Sustainable is expected to generate 1.79 times less return on investment than Fidelity Momentum. But when comparing it to its historical volatility, Fidelity Sustainable World is 1.4 times less risky than Fidelity Momentum. It trades about 0.3 of its potential returns per unit of risk. Fidelity Momentum ETF is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  1,428  in Fidelity Momentum ETF on September 5, 2024 and sell it today you would earn a total of  330.00  from holding Fidelity Momentum ETF or generate 23.11% return on investment over 90 days.

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

Fidelity Sustainable World  vs.  Fidelity Momentum ETF

Fidelity Sustainable

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Sustainable World are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Fidelity Sustainable may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Momentum ETF

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Momentum ETF are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Fidelity Momentum exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Sustainable and Fidelity Momentum

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

The idea behind Fidelity Sustainable World and Fidelity Momentum ETF 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.