Correlation Between Retailing Portfolio and Fidelity 500

Can any of the company-specific risk be diversified away by investing in both Retailing Portfolio and Fidelity 500 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 Retailing Portfolio and Fidelity 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Retailing Portfolio Retailing and Fidelity 500 Index, you can compare the effects of market volatilities on Retailing Portfolio and Fidelity 500 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 Retailing Portfolio with a short position of Fidelity 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retailing Portfolio and Fidelity 500.

Diversification Opportunities for Retailing Portfolio and Fidelity 500

0.89

Correlation Coefficient

Retailing Portfolio  Fidelity 500

Very poor diversification

The 3 months correlation between Retailing and Fidelity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Retailing Portfolio Retailing and Fidelity 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity 500 Index and Retailing Portfolio 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 Retailing Portfolio Retailing are associated (or correlated) with Fidelity 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity 500 Index has no effect on the direction of Retailing Portfolio i.e., Retailing Portfolio and Fidelity 500 go up and down completely randomly.

Pair Corralation between Retailing Portfolio and Fidelity 500

Assuming the 90 days horizon Retailing Portfolio Retailing is expected to under-perform the Fidelity 500. In addition to that, Retailing Portfolio is 1.34 times more volatile than Fidelity 500 Index. It trades about -0.21 of its total potential returns per unit of risk. Fidelity 500 Index is currently generating about -0.1 per unit of volatility. If you would invest  20,963  in Fidelity 500 Index on December 24, 2024 and sell it today you would lose (1,227) from holding Fidelity 500 Index or give up 5.85% of portfolio value over 90 days.

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

Retailing Portfolio Retailing  vs.  Fidelity 500 Index

Retailing Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Retailing Portfolio Retailing has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Fidelity 500 Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity 500 Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Fidelity 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Retailing Portfolio and Fidelity 500

The main advantage of trading using opposite Retailing Portfolio and Fidelity 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retailing Portfolio position performs unexpectedly, Fidelity 500 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 500 will offset losses from the drop in Fidelity 500's long position.

The idea behind Retailing Portfolio Retailing and Fidelity 500 Index 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.