Correlation Between Fidelity Large and Fidelity Focused

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

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

Diversification Opportunities for Fidelity Large and Fidelity Focused

0.97

Correlation Coefficient

Fidelity Large  Fidelity Focused

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Large Cap and Fidelity Focused Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Focused Stock and Fidelity Large 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 Large Cap are associated (or correlated) with Fidelity Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Focused Stock has no effect on the direction of Fidelity Large i.e., Fidelity Large and Fidelity Focused go up and down completely randomly.

Pair Corralation between Fidelity Large and Fidelity Focused

Assuming the 90 days horizon Fidelity Large is expected to generate 1.24 times less return on investment than Fidelity Focused. But when comparing it to its historical volatility, Fidelity Large Cap is 1.41 times less risky than Fidelity Focused. It trades about 0.23 of its potential returns per unit of risk. Fidelity Focused Stock is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,813  in Fidelity Focused Stock on September 2, 2024 and sell it today you would earn a total of  502.00  from holding Fidelity Focused Stock or generate 13.17% return on investment over 90 days.

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

Fidelity Large Cap  vs.  Fidelity Focused Stock

Fidelity Large Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Large Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Focused Stock

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Focused Stock are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Focused may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity Large and Fidelity Focused

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

The idea behind Fidelity Large Cap and Fidelity Focused Stock 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..