Correlation Between Fidelity Diversified and Fidelity Stock

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

Diversification Opportunities for Fidelity Diversified and Fidelity Stock

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Diversified Internati and Fidelity Stock Selector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Stock Selector and Fidelity Diversified 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 Diversified International are associated (or correlated) with Fidelity Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Stock Selector has no effect on the direction of Fidelity Diversified i.e., Fidelity Diversified and Fidelity Stock go up and down completely randomly.

Pair Corralation between Fidelity Diversified and Fidelity Stock

Assuming the 90 days horizon Fidelity Diversified is expected to generate 1.77 times less return on investment than Fidelity Stock. But when comparing it to its historical volatility, Fidelity Diversified International is 1.32 times less risky than Fidelity Stock. It trades about 0.17 of its potential returns per unit of risk. Fidelity Stock Selector is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,714  in Fidelity Stock Selector on October 20, 2024 and sell it today you would earn a total of  142.00  from holding Fidelity Stock Selector or generate 3.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.0%
ValuesDaily Returns

Fidelity Diversified Internati  vs.  Fidelity Stock Selector

 Performance 
       Timeline  
Fidelity Diversified 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fidelity Diversified International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Fidelity Stock Selector 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fidelity Stock Selector has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Fidelity Stock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Diversified and Fidelity Stock Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fidelity Diversified and Fidelity Stock

The main advantage of trading using opposite Fidelity Diversified and Fidelity Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Diversified position performs unexpectedly, Fidelity Stock 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 Stock will offset losses from the drop in Fidelity Stock's long position.
The idea behind Fidelity Diversified International and Fidelity Stock Selector 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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