Correlation Between Fidelity Dividend and Fidelity Equity-income

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

By analyzing existing cross correlation between Fidelity Dividend Growth and Fidelity Equity Income Fund, you can compare the effects of market volatilities on Fidelity Dividend and Fidelity Equity-income 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 Dividend with a short position of Fidelity Equity-income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Dividend and Fidelity Equity-income.

Diversification Opportunities for Fidelity Dividend and Fidelity Equity-income

0.54

Correlation Coefficient

Fidelity Dividend  Fidelity Equity-income

Very weak diversification

The 3 months correlation between Fidelity and Fidelity is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Dividend Growth and Fidelity Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Equity Income and Fidelity Dividend 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 Dividend Growth are associated (or correlated) with Fidelity Equity-income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Equity Income has no effect on the direction of Fidelity Dividend i.e., Fidelity Dividend and Fidelity Equity-income go up and down completely randomly.

Pair Corralation between Fidelity Dividend and Fidelity Equity-income

Assuming the 90 days horizon Fidelity Dividend Growth is expected to generate 1.33 times more return on investment than Fidelity Equity-income. However, Fidelity Dividend is 1.33 times more volatile than Fidelity Equity Income Fund. It trades about 0.07 of its potential returns per unit of risk. Fidelity Equity Income Fund is currently generating about 0.06 per unit of risk. If you would invest  2,875  in Fidelity Dividend Growth on October 9, 2024 and sell it today you would earn a total of  1,029  from holding Fidelity Dividend Growth or generate 35.79% return on investment over 90 days.

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

Fidelity Dividend Growth  vs.  Fidelity Equity Income Fund

Fidelity Dividend Growth

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Dividend Growth are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Fidelity Dividend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Equity Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Equity Income Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Fidelity Equity-income 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 Dividend and Fidelity Equity-income

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

The idea behind Fidelity Dividend Growth and Fidelity Equity Income Fund 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.