Correlation Between Fidelity Puritan and Fidelity Japan

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

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

Diversification Opportunities for Fidelity Puritan and Fidelity Japan

-0.63

Correlation Coefficient

Fidelity Puritan  Fidelity Japan

Excellent diversification

The 3 months correlation between Fidelity and Fidelity is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Puritan Fund and Fidelity Japan Smaller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Japan Smaller and Fidelity Puritan 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 Puritan Fund are associated (or correlated) with Fidelity Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Japan Smaller has no effect on the direction of Fidelity Puritan i.e., Fidelity Puritan and Fidelity Japan go up and down completely randomly.

Pair Corralation between Fidelity Puritan and Fidelity Japan

Assuming the 90 days horizon Fidelity Puritan Fund is expected to under-perform the Fidelity Japan. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity Puritan Fund is 1.03 times less risky than Fidelity Japan. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Fidelity Japan Smaller is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,556  in Fidelity Japan Smaller on December 30, 2024 and sell it today you would earn a total of  64.00  from holding Fidelity Japan Smaller or generate 4.11% return on investment over 90 days.

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

Fidelity Puritan Fund  vs.  Fidelity Japan Smaller

Fidelity Puritan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Puritan Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Puritan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Japan Smaller

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Japan Smaller are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fidelity Japan 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 Puritan and Fidelity Japan

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

The idea behind Fidelity Puritan Fund and Fidelity Japan Smaller 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.