Correlation Between Fidelity Government and Fidelity Short

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

By analyzing existing cross correlation between Fidelity Government Income and Fidelity Short Term Bond, you can compare the effects of market volatilities on Fidelity Government and Fidelity Short 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 Government with a short position of Fidelity Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Government and Fidelity Short.

Diversification Opportunities for Fidelity Government and Fidelity Short

0.76

Correlation Coefficient

Fidelity Government  Fidelity Short

Poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Government Income and Fidelity Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Short Term and Fidelity Government 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 Government Income are associated (or correlated) with Fidelity Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Short Term has no effect on the direction of Fidelity Government i.e., Fidelity Government and Fidelity Short go up and down completely randomly.

Pair Corralation between Fidelity Government and Fidelity Short

Assuming the 90 days horizon Fidelity Government Income is expected to under-perform the Fidelity Short. In addition to that, Fidelity Government is 2.44 times more volatile than Fidelity Short Term Bond. It trades about -0.15 of its total potential returns per unit of risk. Fidelity Short Term Bond is currently generating about 0.02 per unit of volatility. If you would invest  845.00  in Fidelity Short Term Bond on September 14, 2024 and sell it today you would earn a total of  1.00  from holding Fidelity Short Term Bond or generate 0.12% return on investment over 90 days.

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

Fidelity Government Income  vs.  Fidelity Short Term Bond

Fidelity Government

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Short Term

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Short Term Bond are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Fidelity Short 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 Government and Fidelity Short

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

The idea behind Fidelity Government Income and Fidelity Short Term Bond 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.