Correlation Between Fidelity Series and Financial Industries

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

By analyzing existing cross correlation between Fidelity Series Government and Financial Industries Fund, you can compare the effects of market volatilities on Fidelity Series and Financial Industries 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 Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Series and Financial Industries.

Diversification Opportunities for Fidelity Series and Financial Industries

0.49

Correlation Coefficient

Fidelity Series  Financial Industries

Very weak diversification

The 3 months correlation between Fidelity and Financial is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Series Government and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries 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 Government are associated (or correlated) with Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Fidelity Series i.e., Fidelity Series and Financial Industries go up and down completely randomly.

Pair Corralation between Fidelity Series and Financial Industries

Assuming the 90 days horizon Fidelity Series is expected to generate 11.56 times less return on investment than Financial Industries. But when comparing it to its historical volatility, Fidelity Series Government is 4.13 times less risky than Financial Industries. It trades about 0.07 of its potential returns per unit of risk. Financial Industries Fund is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,510  in Financial Industries Fund on October 22, 2024 and sell it today you would earn a total of  59.00  from holding Financial Industries Fund or generate 3.91% return on investment over 90 days.

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

Fidelity Series Government  vs.  Financial Industries Fund

Fidelity Series Gove

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Series Government has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and 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.

Financial Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financial Industries Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Financial Industries 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 Financial Industries

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

The idea behind Fidelity Series Government and Financial Industries Fund 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.