Correlation Between Fidelity Income and Fidelity Investment

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

Diversification Opportunities for Fidelity Income and Fidelity Investment

0.91

Correlation Coefficient

Fidelity Income  Fidelity Investment

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Income Replacement and Fidelity Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Investment Grade 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 Fidelity Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Investment Grade has no effect on the direction of Fidelity Income i.e., Fidelity Income and Fidelity Investment go up and down completely randomly.

Pair Corralation between Fidelity Income and Fidelity Investment

Assuming the 90 days horizon Fidelity Income is expected to generate 1.41 times less return on investment than Fidelity Investment. But when comparing it to its historical volatility, Fidelity Income Replacement is 1.13 times less risky than Fidelity Investment. It trades about 0.05 of its potential returns per unit of risk. Fidelity Investment Grade is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  717.00  in Fidelity Investment Grade on December 3, 2024 and sell it today you would earn a total of  9.00  from holding Fidelity Investment Grade or generate 1.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Fidelity Income Replacement  vs.  Fidelity Investment Grade

Fidelity Income Repl

Risk-Adjusted Performance

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 forward indicators, Fidelity Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Investment Grade

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Investment Grade are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fidelity Investment 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 Fidelity Investment

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

The idea behind Fidelity Income Replacement and Fidelity Investment Grade 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.