Correlation Between Aggressive Growth and Fidelity Short-term

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

By analyzing existing cross correlation between Aggressive Growth Allocation and Fidelity Short Term Treasury, you can compare the effects of market volatilities on Aggressive Growth and Fidelity Short-term 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 Aggressive Growth with a short position of Fidelity Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aggressive Growth and Fidelity Short-term.

Diversification Opportunities for Aggressive Growth and Fidelity Short-term

0.64

Correlation Coefficient

Aggressive Growth  Fidelity Short-term

Poor diversification

The 3 months correlation between Aggressive and Fidelity is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Growth Allocation and Fidelity Short Term Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Short Term and Aggressive Growth 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 Aggressive Growth Allocation are associated (or correlated) with Fidelity Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Short Term has no effect on the direction of Aggressive Growth i.e., Aggressive Growth and Fidelity Short-term go up and down completely randomly.

Pair Corralation between Aggressive Growth and Fidelity Short-term

Assuming the 90 days horizon Aggressive Growth is expected to generate 7.95 times less return on investment than Fidelity Short-term. In addition to that, Aggressive Growth is 4.93 times more volatile than Fidelity Short Term Treasury. It trades about 0.0 of its total potential returns per unit of risk. Fidelity Short Term Treasury is currently generating about 0.13 per unit of volatility. If you would invest  1,014  in Fidelity Short Term Treasury on November 29, 2024 and sell it today you would earn a total of  10.00  from holding Fidelity Short Term Treasury or generate 0.99% return on investment over 90 days.

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

Aggressive Growth Allocation  vs.  Fidelity Short Term Treasury

Aggressive Growth

Risk-Adjusted Performance

Very Weak

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

Fidelity Short Term

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Short Term Treasury are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Fidelity Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aggressive Growth and Fidelity Short-term

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

The idea behind Aggressive Growth Allocation and Fidelity Short Term Treasury 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.