Correlation Between Fidelity New and Fidelity Covington

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

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

Diversification Opportunities for Fidelity New and Fidelity Covington

-0.23

Correlation Coefficient

Fidelity New  Fidelity Covington

Very good diversification

The 3 months correlation between Fidelity and Fidelity is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity New Millennium and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust and Fidelity New 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 New Millennium are associated (or correlated) with Fidelity Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of Fidelity New i.e., Fidelity New and Fidelity Covington go up and down completely randomly.

Pair Corralation between Fidelity New and Fidelity Covington

Given the investment horizon of 90 days Fidelity New Millennium is expected to under-perform the Fidelity Covington. But the etf apears to be less risky and, when comparing its historical volatility, Fidelity New Millennium is 1.56 times less risky than Fidelity Covington. The etf trades about -0.11 of its potential returns per unit of risk. The Fidelity Covington Trust is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,419  in Fidelity Covington Trust on October 10, 2024 and sell it today you would lose (33.00) from holding Fidelity Covington Trust or give up 2.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

Fidelity New Millennium  vs.  Fidelity Covington Trust

Fidelity New Millennium

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Fidelity New Millennium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Fidelity New is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Fidelity Covington Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Covington Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fidelity Covington is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fidelity New and Fidelity Covington

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

The idea behind Fidelity New Millennium and Fidelity Covington Trust 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.