Correlation Between Fidelity Stock and Fidelity Trend

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

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

Diversification Opportunities for Fidelity Stock and Fidelity Trend

0.98

Correlation Coefficient

Fidelity Stock  Fidelity Trend

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Stock Selector and Fidelity Trend Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Trend and Fidelity Stock 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 Stock Selector are associated (or correlated) with Fidelity Trend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Trend has no effect on the direction of Fidelity Stock i.e., Fidelity Stock and Fidelity Trend go up and down completely randomly.

Pair Corralation between Fidelity Stock and Fidelity Trend

Assuming the 90 days horizon Fidelity Stock Selector is expected to generate 0.61 times more return on investment than Fidelity Trend. However, Fidelity Stock Selector is 1.65 times less risky than Fidelity Trend. It trades about -0.11 of its potential returns per unit of risk. Fidelity Trend Fund is currently generating about -0.14 per unit of risk. If you would invest  3,712  in Fidelity Stock Selector on December 30, 2024 and sell it today you would lose (315.00) from holding Fidelity Stock Selector or give up 8.49% of portfolio value over 90 days.

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

Fidelity Stock Selector  vs.  Fidelity Trend Fund

Fidelity Stock Selector

Risk-Adjusted Performance

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 latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Fidelity Trend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Trend Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Fidelity Stock and Fidelity Trend

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

The idea behind Fidelity Stock Selector and Fidelity Trend 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.