Correlation Between Fidelity Real and Federated Bond

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

By analyzing existing cross correlation between Fidelity Real Estate and Federated Bond Fund, you can compare the effects of market volatilities on Fidelity Real and Federated Bond 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 Real with a short position of Federated Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Real and Federated Bond.

Diversification Opportunities for Fidelity Real and Federated Bond

0.69

Correlation Coefficient

Fidelity Real  Federated Bond

Poor diversification

The 3 months correlation between Fidelity and FEDERATED is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Real Estate and Federated Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Bond and Fidelity Real 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 Real Estate are associated (or correlated) with Federated Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Bond has no effect on the direction of Fidelity Real i.e., Fidelity Real and Federated Bond go up and down completely randomly.

Pair Corralation between Fidelity Real and Federated Bond

Assuming the 90 days horizon Fidelity Real Estate is expected to generate 1.05 times more return on investment than Federated Bond. However, Fidelity Real is 1.05 times more volatile than Federated Bond Fund. It trades about 0.1 of its potential returns per unit of risk. Federated Bond Fund is currently generating about 0.05 per unit of risk. If you would invest  1,219  in Fidelity Real Estate on August 31, 2024 and sell it today you would earn a total of  9.00  from holding Fidelity Real Estate or generate 0.74% return on investment over 90 days.

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

Fidelity Real Estate  vs.  Federated Bond Fund

Fidelity Real Estate

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Real Estate are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Fidelity Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Federated Bond 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 Real and Federated Bond

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

The idea behind Fidelity Real Estate and Federated Bond 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.