Correlation Between Fidelity Mega and Fidelity Stock

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

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

Diversification Opportunities for Fidelity Mega and Fidelity Stock

0.8

Correlation Coefficient

Fidelity Mega  Fidelity Stock

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Mega Cap and Fidelity Stock Selector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Stock Selector and Fidelity Mega 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 Mega Cap are associated (or correlated) with Fidelity Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Stock Selector has no effect on the direction of Fidelity Mega i.e., Fidelity Mega and Fidelity Stock go up and down completely randomly.

Pair Corralation between Fidelity Mega and Fidelity Stock

Assuming the 90 days horizon Fidelity Mega Cap is expected to generate 0.94 times more return on investment than Fidelity Stock. However, Fidelity Mega Cap is 1.07 times less risky than Fidelity Stock. It trades about -0.04 of its potential returns per unit of risk. Fidelity Stock Selector is currently generating about -0.1 per unit of risk. If you would invest  2,572  in Fidelity Mega Cap on December 30, 2024 and sell it today you would lose (70.00) from holding Fidelity Mega Cap or give up 2.72% of portfolio value over 90 days.

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

Fidelity Mega Cap  vs.  Fidelity Stock Selector

Fidelity Mega Cap

Risk-Adjusted Performance

Very Weak

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

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 basic 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 Mega and Fidelity Stock

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

The idea behind Fidelity Mega Cap and Fidelity Stock Selector 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.