Correlation Between Fidelity Series and Westwood High

Can any of the company-specific risk be diversified away by investing in both Fidelity Series and Westwood 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 Series and Westwood High 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 Westwood High Income, you can compare the effects of market volatilities on Fidelity Series and Westwood 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 Series with a short position of Westwood High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Series and Westwood High.

Diversification Opportunities for Fidelity Series and Westwood High

-0.19

Correlation Coefficient

Fidelity Series  Westwood High

Good diversification

The 3 months correlation between Fidelity and Westwood is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Series Government and Westwood High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood High Income 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 Westwood High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood High Income has no effect on the direction of Fidelity Series i.e., Fidelity Series and Westwood High go up and down completely randomly.

Pair Corralation between Fidelity Series and Westwood High

Assuming the 90 days horizon Fidelity Series Government is expected to under-perform the Westwood High. In addition to that, Fidelity Series is 1.21 times more volatile than Westwood High Income. It trades about -0.11 of its total potential returns per unit of risk. Westwood High Income is currently generating about 0.12 per unit of volatility. If you would invest  1,005  in Westwood High Income on September 12, 2024 and sell it today you would earn a total of  19.00  from holding Westwood High Income or generate 1.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Fidelity Series Government  vs.  Westwood High Income

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.

Westwood High Income

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westwood High Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Westwood 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 Series and Westwood High

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

The idea behind Fidelity Series Government and Westwood High Income 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.