Correlation Between Fidelity High and FlexShares High

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Can any of the company-specific risk be diversified away by investing in both Fidelity High and FlexShares High 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 FlexShares High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity High Yield and FlexShares High Yield, you can compare the effects of market volatilities on Fidelity High and FlexShares High 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 FlexShares High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity High and FlexShares High.

Diversification Opportunities for Fidelity High and FlexShares High

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Fidelity and FlexShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity High Yield and FlexShares High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares High Yield 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 Yield are associated (or correlated) with FlexShares High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares High Yield has no effect on the direction of Fidelity High i.e., Fidelity High and FlexShares High go up and down completely randomly.

Pair Corralation between Fidelity High and FlexShares High

Given the investment horizon of 90 days Fidelity High Yield is expected to under-perform the FlexShares High. In addition to that, Fidelity High is 1.03 times more volatile than FlexShares High Yield. It trades about -0.09 of its total potential returns per unit of risk. FlexShares High Yield is currently generating about -0.09 per unit of volatility. If you would invest  4,088  in FlexShares High Yield on September 28, 2024 and sell it today you would lose (24.00) from holding FlexShares High Yield or give up 0.59% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Fidelity High Yield  vs.  FlexShares High Yield

 Performance 
       Timeline  
Fidelity High Yield 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fidelity High Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Fidelity High is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
FlexShares High Yield 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days FlexShares High Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, FlexShares High is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Fidelity High and FlexShares High Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fidelity High and FlexShares High

The main advantage of trading using opposite Fidelity High and FlexShares High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity High position performs unexpectedly, FlexShares High 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 FlexShares High will offset losses from the drop in FlexShares High's long position.
The idea behind Fidelity High Yield and FlexShares High Yield 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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