Correlation Between Growth Allocation and Fidelity Corporate

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

By analyzing existing cross correlation between Growth Allocation Index and Fidelity Porate Bond, you can compare the effects of market volatilities on Growth Allocation and Fidelity Corporate 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 Growth Allocation with a short position of Fidelity Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Allocation and Fidelity Corporate.

Diversification Opportunities for Growth Allocation and Fidelity Corporate

0.17

Correlation Coefficient

Growth Allocation  Fidelity Corporate

Average diversification

The 3 months correlation between Growth and Fidelity is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Growth Allocation Index and Fidelity Porate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Porate Bond and Growth Allocation 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 Growth Allocation Index are associated (or correlated) with Fidelity Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Porate Bond has no effect on the direction of Growth Allocation i.e., Growth Allocation and Fidelity Corporate go up and down completely randomly.

Pair Corralation between Growth Allocation and Fidelity Corporate

Assuming the 90 days horizon Growth Allocation is expected to generate 23.45 times less return on investment than Fidelity Corporate. In addition to that, Growth Allocation is 1.96 times more volatile than Fidelity Porate Bond. It trades about 0.0 of its total potential returns per unit of risk. Fidelity Porate Bond is currently generating about 0.14 per unit of volatility. If you would invest  1,029  in Fidelity Porate Bond on December 21, 2024 and sell it today you would earn a total of  29.00  from holding Fidelity Porate Bond or generate 2.82% return on investment over 90 days.

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

Growth Allocation Index  vs.  Fidelity Porate Bond

Growth Allocation Index

Risk-Adjusted Performance

Very Weak

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

Fidelity Porate Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Porate Bond are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Fidelity Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Growth Allocation and Fidelity Corporate

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

The idea behind Growth Allocation Index and Fidelity Porate Bond 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.