Correlation Between Fidelity Income and Health Care

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

By analyzing existing cross correlation between Fidelity Income Replacement and Health Care Portfolio, you can compare the effects of market volatilities on Fidelity Income and Health Care 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 Income with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Income and Health Care.

Diversification Opportunities for Fidelity Income and Health Care

0.66

Correlation Coefficient

Fidelity Income  Health Care

Poor diversification

The 3 months correlation between Fidelity and Health is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Income Replacement and Health Care Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Portfolio and Fidelity Income 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 Income Replacement are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Portfolio has no effect on the direction of Fidelity Income i.e., Fidelity Income and Health Care go up and down completely randomly.

Pair Corralation between Fidelity Income and Health Care

Assuming the 90 days horizon Fidelity Income Replacement is expected to generate 0.31 times more return on investment than Health Care. However, Fidelity Income Replacement is 3.23 times less risky than Health Care. It trades about 0.06 of its potential returns per unit of risk. Health Care Portfolio is currently generating about 0.0 per unit of risk. If you would invest  5,388  in Fidelity Income Replacement on September 3, 2024 and sell it today you would earn a total of  49.00  from holding Fidelity Income Replacement or generate 0.91% return on investment over 90 days.

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

Fidelity Income Replacement  vs.  Health Care Portfolio

Fidelity Income Repl

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Income Replacement are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Health Care Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fidelity Income and Health Care

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

The idea behind Fidelity Income Replacement and Health Care Portfolio 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.