Correlation Between Fidelity Puritan and Fidelity High

Can any of the company-specific risk be diversified away by investing in both Fidelity Puritan and Fidelity High 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 High 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 High Income, you can compare the effects of market volatilities on Fidelity Puritan and Fidelity High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Puritan and Fidelity High.

Diversification Opportunities for Fidelity Puritan and Fidelity High

0.83

Correlation Coefficient

Fidelity Puritan  Fidelity High

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Puritan Fund and Fidelity High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity High Income 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity High Income has no effect on the direction of Fidelity Puritan i.e., Fidelity Puritan and Fidelity High go up and down completely randomly.

Pair Corralation between Fidelity Puritan and Fidelity High

Assuming the 90 days horizon Fidelity Puritan Fund is expected to under-perform the Fidelity High. In addition to that, Fidelity Puritan is 3.16 times more volatile than Fidelity High Income. It trades about -0.18 of its total potential returns per unit of risk. Fidelity High Income is currently generating about -0.28 per unit of volatility. If you would invest  797.00  in Fidelity High Income on September 24, 2024 and sell it today you would lose (10.00) from holding Fidelity High Income or give up 1.25% of portfolio value over 90 days.

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

Fidelity Puritan Fund  vs.  Fidelity High Income

Fidelity Puritan

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Puritan Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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 High Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity High Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Fidelity High 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 High

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

The idea behind Fidelity Puritan Fund and Fidelity High Income 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.