Correlation Between Fidelity Quality and IShares Core

Can any of the company-specific risk be diversified away by investing in both Fidelity Quality 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 Quality 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 Quality Factor and iShares Core SP, you can compare the effects of market volatilities on Fidelity Quality 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 Quality with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Quality and IShares Core.

Diversification Opportunities for Fidelity Quality and IShares Core

0.98

Correlation Coefficient

Fidelity Quality  IShares Core

Almost no diversification

The 3 months correlation between Fidelity and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Quality Factor and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 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 SP has no effect on the direction of Fidelity Quality i.e., Fidelity Quality and IShares Core go up and down completely randomly.

Pair Corralation between Fidelity Quality and IShares Core

Given the investment horizon of 90 days Fidelity Quality is expected to generate 1.09 times less return on investment than IShares Core. But when comparing it to its historical volatility, Fidelity Quality Factor is 1.04 times less risky than IShares Core. It trades about 0.09 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  54,527  in iShares Core SP on September 25, 2024 and sell it today you would earn a total of  5,668  from holding iShares Core SP or generate 10.39% 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.  iShares Core SP

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.

iShares Core SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fidelity Quality and IShares Core

The main advantage of trading using opposite Fidelity Quality and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Quality 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 Quality Factor and iShares Core SP 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.