Correlation Between Fidelity High and Dynamic Active

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

By analyzing existing cross correlation between Fidelity High Quality and Dynamic Active Preferred, you can compare the effects of market volatilities on Fidelity High and Dynamic Active 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 High with a short position of Dynamic Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity High and Dynamic Active.

Diversification Opportunities for Fidelity High and Dynamic Active

0.09

Correlation Coefficient

Fidelity High  Dynamic Active

Significant diversification

The 3 months correlation between Fidelity and Dynamic is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity High Quality and Dynamic Active Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Active Preferred and Fidelity High 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 High Quality are associated (or correlated) with Dynamic Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Active Preferred has no effect on the direction of Fidelity High i.e., Fidelity High and Dynamic Active go up and down completely randomly.

Pair Corralation between Fidelity High and Dynamic Active

Assuming the 90 days trading horizon Fidelity High Quality is expected to under-perform the Dynamic Active. In addition to that, Fidelity High is 2.22 times more volatile than Dynamic Active Preferred. It trades about -0.07 of its total potential returns per unit of risk. Dynamic Active Preferred is currently generating about 0.16 per unit of volatility. If you would invest  2,279  in Dynamic Active Preferred on December 24, 2024 and sell it today you would earn a total of  88.00  from holding Dynamic Active Preferred or generate 3.86% return on investment over 90 days.

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

Fidelity High Quality  vs.  Dynamic Active Preferred

Fidelity High Quality

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity High Quality has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Fidelity High is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Dynamic Active Preferred

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active Preferred are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Dynamic Active is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fidelity High and Dynamic Active

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

The idea behind Fidelity High Quality and Dynamic Active Preferred 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.