Correlation Between Fidelity Low-priced and American Beacon

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

By analyzing existing cross correlation between Fidelity Low Priced Stock and American Beacon Small, you can compare the effects of market volatilities on Fidelity Low-priced and American Beacon 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 Low-priced with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Low-priced and American Beacon.

Diversification Opportunities for Fidelity Low-priced and American Beacon

0.67

Correlation Coefficient

Fidelity Low-priced  American Beacon

Poor diversification

The 3 months correlation between Fidelity and American is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Low Priced Stock and American Beacon Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Small and Fidelity Low-priced 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 Low Priced Stock are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Small has no effect on the direction of Fidelity Low-priced i.e., Fidelity Low-priced and American Beacon go up and down completely randomly.

Pair Corralation between Fidelity Low-priced and American Beacon

Assuming the 90 days horizon Fidelity Low Priced Stock is expected to generate 0.74 times more return on investment than American Beacon. However, Fidelity Low Priced Stock is 1.35 times less risky than American Beacon. It trades about 0.0 of its potential returns per unit of risk. American Beacon Small is currently generating about -0.12 per unit of risk. If you would invest  4,055  in Fidelity Low Priced Stock on December 22, 2024 and sell it today you would lose (5.00) from holding Fidelity Low Priced Stock or give up 0.12% of portfolio value over 90 days.

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

Fidelity Low Priced Stock  vs.  American Beacon Small

Fidelity Low Priced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Low Priced Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Fidelity Low-priced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Beacon Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Beacon Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Fidelity Low-priced and American Beacon

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

The idea behind Fidelity Low Priced Stock and American Beacon Small 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.