Correlation Between Fidelity Series and Metropolitan West

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

By analyzing existing cross correlation between Fidelity Series Floating and Metropolitan West Unconstrained, you can compare the effects of market volatilities on Fidelity Series and Metropolitan West 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 Series with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Series and Metropolitan West.

Diversification Opportunities for Fidelity Series and Metropolitan West

-0.45

Correlation Coefficient

Fidelity Series  Metropolitan West

Very good diversification

The 3 months correlation between Fidelity and Metropolitan is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Series Floating and Metropolitan West Unconstraine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West and Fidelity Series 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 Series Floating are associated (or correlated) with Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West has no effect on the direction of Fidelity Series i.e., Fidelity Series and Metropolitan West go up and down completely randomly.

Pair Corralation between Fidelity Series and Metropolitan West

Assuming the 90 days horizon Fidelity Series Floating is expected to generate 0.69 times more return on investment than Metropolitan West. However, Fidelity Series Floating is 1.45 times less risky than Metropolitan West. It trades about 0.28 of its potential returns per unit of risk. Metropolitan West Unconstrained is currently generating about -0.08 per unit of risk. If you would invest  883.00  in Fidelity Series Floating on September 16, 2024 and sell it today you would earn a total of  21.00  from holding Fidelity Series Floating or generate 2.38% return on investment over 90 days.

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

Fidelity Series Floating  vs.  Metropolitan West Unconstraine

Fidelity Series Floating

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Series Floating are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fidelity Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Metropolitan West

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolitan West Unconstrained has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Metropolitan West 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 Series and Metropolitan West

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

The idea behind Fidelity Series Floating and Metropolitan West Unconstrained 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.