Correlation Between Fidelity New and Franklin High

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

By analyzing existing cross correlation between Fidelity New Markets and Franklin High Yield, you can compare the effects of market volatilities on Fidelity New and Franklin High 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 New with a short position of Franklin High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity New and Franklin High.

Diversification Opportunities for Fidelity New and Franklin High

0.92

Correlation Coefficient

Fidelity New  Franklin High

Almost no diversification

The 3 months correlation between Fidelity and Franklin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity New Markets and Franklin High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin High Yield and Fidelity New 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 New Markets are associated (or correlated) with Franklin High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin High Yield has no effect on the direction of Fidelity New i.e., Fidelity New and Franklin High go up and down completely randomly.

Pair Corralation between Fidelity New and Franklin High

Assuming the 90 days horizon Fidelity New Markets is expected to generate 1.21 times more return on investment than Franklin High. However, Fidelity New is 1.21 times more volatile than Franklin High Yield. It trades about 0.19 of its potential returns per unit of risk. Franklin High Yield is currently generating about 0.09 per unit of risk. If you would invest  1,252  in Fidelity New Markets on December 21, 2024 and sell it today you would earn a total of  43.00  from holding Fidelity New Markets or generate 3.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

Fidelity New Markets  vs.  Franklin High Yield

Fidelity New Markets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity New Markets are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Fidelity New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin High Yield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin High Yield are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin High 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 New and Franklin High

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

The idea behind Fidelity New Markets and Franklin High Yield 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.