Correlation Between Fidelity Growth and Fidelity Blue

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

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

Diversification Opportunities for Fidelity Growth and Fidelity Blue

0.87

Correlation Coefficient

Fidelity Growth  Fidelity Blue

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Growth Income and Fidelity Blue Chip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Blue Chip and Fidelity Growth 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 Growth Income are associated (or correlated) with Fidelity Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Blue Chip has no effect on the direction of Fidelity Growth i.e., Fidelity Growth and Fidelity Blue go up and down completely randomly.

Pair Corralation between Fidelity Growth and Fidelity Blue

Assuming the 90 days horizon Fidelity Growth is expected to generate 4.05 times less return on investment than Fidelity Blue. But when comparing it to its historical volatility, Fidelity Growth Income is 1.38 times less risky than Fidelity Blue. It trades about 0.08 of its potential returns per unit of risk. Fidelity Blue Chip is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  20,278  in Fidelity Blue Chip on September 12, 2024 and sell it today you would earn a total of  3,208  from holding Fidelity Blue Chip or generate 15.82% return on investment over 90 days.

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

Fidelity Growth Income  vs.  Fidelity Blue Chip

Fidelity Growth Income

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Growth Income are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Fidelity Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Blue Chip

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Blue Chip are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Blue showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Growth and Fidelity Blue

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

The idea behind Fidelity Growth Income and Fidelity Blue Chip 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.