Correlation Between Fidelity and Financial Institutions

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

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

Diversification Opportunities for Fidelity and Financial Institutions

0.29

Correlation Coefficient

Fidelity  Financial Institutions

Modest diversification

The 3 months correlation between Fidelity and Financial is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity DD Bancorp and Financial Institutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Institutions and Fidelity 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 DD Bancorp are associated (or correlated) with Financial Institutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Institutions has no effect on the direction of Fidelity i.e., Fidelity and Financial Institutions go up and down completely randomly.

Pair Corralation between Fidelity and Financial Institutions

Given the investment horizon of 90 days Fidelity DD Bancorp is expected to under-perform the Financial Institutions. In addition to that, Fidelity is 1.46 times more volatile than Financial Institutions. It trades about -0.07 of its total potential returns per unit of risk. Financial Institutions is currently generating about -0.06 per unit of volatility. If you would invest  2,670  in Financial Institutions on December 30, 2024 and sell it today you would lose (170.00) from holding Financial Institutions or give up 6.37% of portfolio value over 90 days.

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

Fidelity DD Bancorp  vs.  Financial Institutions

Fidelity DD Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity DD Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Financial Institutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Financial Institutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Financial Institutions is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Fidelity and Financial Institutions

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

The idea behind Fidelity DD Bancorp and Financial Institutions 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.