Correlation Between Fidelity Limited and IShares Core

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

By analyzing existing cross correlation between Fidelity Limited Term and iShares Core Total, you can compare the effects of market volatilities on Fidelity Limited and IShares Core 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 Limited with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Limited and IShares Core.

Diversification Opportunities for Fidelity Limited and IShares Core

0.89

Correlation Coefficient

Fidelity Limited  IShares Core

Very poor diversification

The 3 months correlation between Fidelity and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Limited Term and iShares Core Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Total and Fidelity Limited 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 Limited Term are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Total has no effect on the direction of Fidelity Limited i.e., Fidelity Limited and IShares Core go up and down completely randomly.

Pair Corralation between Fidelity Limited and IShares Core

Given the investment horizon of 90 days Fidelity Limited Term is expected to generate 0.41 times more return on investment than IShares Core. However, Fidelity Limited Term is 2.43 times less risky than IShares Core. It trades about -0.07 of its potential returns per unit of risk. iShares Core Total is currently generating about -0.15 per unit of risk. If you would invest  4,999  in Fidelity Limited Term on September 22, 2024 and sell it today you would lose (28.00) from holding Fidelity Limited Term or give up 0.56% of portfolio value over 90 days.

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

Fidelity Limited Term  vs.  iShares Core Total

Fidelity Limited Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Limited Term has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fidelity Limited is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

iShares Core Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Total has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Limited and IShares Core

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

The idea behind Fidelity Limited Term and iShares Core Total 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.