Correlation Between Fidelity Value and Fidelity Leveraged

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

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

Diversification Opportunities for Fidelity Value and Fidelity Leveraged

0.95

Correlation Coefficient

Fidelity Value  Fidelity Leveraged

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Value Fund and Fidelity Leveraged Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Leveraged Pany and Fidelity Value 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 Value Fund are associated (or correlated) with Fidelity Leveraged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Leveraged Pany has no effect on the direction of Fidelity Value i.e., Fidelity Value and Fidelity Leveraged go up and down completely randomly.

Pair Corralation between Fidelity Value and Fidelity Leveraged

Assuming the 90 days horizon Fidelity Value Fund is expected to generate 0.54 times more return on investment than Fidelity Leveraged. However, Fidelity Value Fund is 1.84 times less risky than Fidelity Leveraged. It trades about -0.07 of its potential returns per unit of risk. Fidelity Leveraged Pany is currently generating about -0.09 per unit of risk. If you would invest  1,352  in Fidelity Value Fund on December 30, 2024 and sell it today you would lose (65.00) from holding Fidelity Value Fund or give up 4.81% of portfolio value over 90 days.

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

Fidelity Value Fund  vs.  Fidelity Leveraged Pany

Fidelity Value

Risk-Adjusted Performance

Very Weak

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

Fidelity Leveraged Pany

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Leveraged Pany 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.

Pair Trading with Fidelity Value and Fidelity Leveraged

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

The idea behind Fidelity Value Fund and Fidelity Leveraged Pany 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.