Correlation Between Growth Allocation and Fidelity Asset

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

Diversification Opportunities for Growth Allocation and Fidelity Asset

0.6

Correlation Coefficient

Growth Allocation  Fidelity Asset

Poor diversification

The 3 months correlation between Growth and Fidelity is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Growth Allocation Index and Fidelity Asset Manager in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Asset Manager 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 Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Asset Manager has no effect on the direction of Growth Allocation i.e., Growth Allocation and Fidelity Asset go up and down completely randomly.

Pair Corralation between Growth Allocation and Fidelity Asset

Assuming the 90 days horizon Growth Allocation is expected to generate 1.24 times less return on investment than Fidelity Asset. But when comparing it to its historical volatility, Growth Allocation Index is 1.27 times less risky than Fidelity Asset. It trades about 0.2 of its potential returns per unit of risk. Fidelity Asset Manager is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,600  in Fidelity Asset Manager on September 10, 2024 and sell it today you would earn a total of  192.00  from holding Fidelity Asset Manager or generate 7.38% return on investment over 90 days.

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

Growth Allocation Index  vs.  Fidelity Asset Manager

Growth Allocation Index

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Allocation Index are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. 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 Asset Manager

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Asset Manager are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Asset may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Growth Allocation and Fidelity Asset

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

The idea behind Growth Allocation Index and Fidelity Asset Manager 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.