Correlation Between Fidelity Large and Consumer Discretionary

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

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

Diversification Opportunities for Fidelity Large and Consumer Discretionary

0.94

Correlation Coefficient

Fidelity Large  Consumer Discretionary

Almost no diversification

The 3 months correlation between Fidelity and Consumer is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Large Cap and Consumer Discretionary Portfol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Discretionary and Fidelity Large 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 Large Cap are associated (or correlated) with Consumer Discretionary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Discretionary has no effect on the direction of Fidelity Large i.e., Fidelity Large and Consumer Discretionary go up and down completely randomly.

Pair Corralation between Fidelity Large and Consumer Discretionary

Assuming the 90 days horizon Fidelity Large Cap is expected to generate 0.58 times more return on investment than Consumer Discretionary. However, Fidelity Large Cap is 1.73 times less risky than Consumer Discretionary. It trades about -0.1 of its potential returns per unit of risk. Consumer Discretionary Portfolio is currently generating about -0.19 per unit of risk. If you would invest  4,011  in Fidelity Large Cap on October 5, 2024 and sell it today you would lose (100.00) from holding Fidelity Large Cap or give up 2.49% of portfolio value over 90 days.

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

Fidelity Large Cap  vs.  Consumer Discretionary Portfol

Fidelity Large Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Large Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Large may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Consumer Discretionary

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Discretionary Portfolio are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Consumer Discretionary may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fidelity Large and Consumer Discretionary

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

The idea behind Fidelity Large Cap and Consumer Discretionary 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.