Correlation Between Fidelity Contrafund and Cargile Fund

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

By analyzing existing cross correlation between Fidelity Contrafund K6 and Cargile Fund, you can compare the effects of market volatilities on Fidelity Contrafund and Cargile Fund 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 Contrafund with a short position of Cargile Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Contrafund and Cargile Fund.

Diversification Opportunities for Fidelity Contrafund and Cargile Fund

0.96

Correlation Coefficient

Fidelity Contrafund  Cargile Fund

Almost no diversification

The 3 months correlation between Fidelity and Cargile is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Contrafund K6 and Cargile Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cargile Fund and Fidelity Contrafund 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 Contrafund K6 are associated (or correlated) with Cargile Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cargile Fund has no effect on the direction of Fidelity Contrafund i.e., Fidelity Contrafund and Cargile Fund go up and down completely randomly.

Pair Corralation between Fidelity Contrafund and Cargile Fund

Assuming the 90 days horizon Fidelity Contrafund K6 is expected to generate 1.59 times more return on investment than Cargile Fund. However, Fidelity Contrafund is 1.59 times more volatile than Cargile Fund. It trades about 0.14 of its potential returns per unit of risk. Cargile Fund is currently generating about 0.02 per unit of risk. If you would invest  1,690  in Fidelity Contrafund K6 on September 27, 2024 and sell it today you would earn a total of  1,510  from holding Fidelity Contrafund K6 or generate 89.35% return on investment over 90 days.

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

Fidelity Contrafund K6  vs.  Cargile Fund

Fidelity Contrafund

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Contrafund K6 are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Contrafund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cargile Fund

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cargile Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Cargile Fund 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 Contrafund and Cargile Fund

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

The idea behind Fidelity Contrafund K6 and Cargile 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.