Correlation Between Fidelity Quality and Dimensional Core

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

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

Diversification Opportunities for Fidelity Quality and Dimensional Core

0.98

Correlation Coefficient

Fidelity Quality  Dimensional Core

Almost no diversification

The 3 months correlation between Fidelity and Dimensional is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Quality Factor and Dimensional Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Core Equity and Fidelity Quality 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 Quality Factor are associated (or correlated) with Dimensional Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Core Equity has no effect on the direction of Fidelity Quality i.e., Fidelity Quality and Dimensional Core go up and down completely randomly.

Pair Corralation between Fidelity Quality and Dimensional Core

Given the investment horizon of 90 days Fidelity Quality is expected to generate 1.06 times less return on investment than Dimensional Core. But when comparing it to its historical volatility, Fidelity Quality Factor is 1.08 times less risky than Dimensional Core. It trades about 0.09 of its potential returns per unit of risk. Dimensional Core Equity is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,208  in Dimensional Core Equity on September 25, 2024 and sell it today you would earn a total of  320.00  from holding Dimensional Core Equity or generate 9.98% return on investment over 90 days.

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

Fidelity Quality Factor  vs.  Dimensional Core Equity

Fidelity Quality Factor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Quality Factor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Fidelity Quality is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Dimensional Core Equity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Core Equity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Dimensional Core is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fidelity Quality and Dimensional Core

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

The idea behind Fidelity Quality Factor and Dimensional Core Equity 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.