Correlation Between Utilities Portfolio and Fidelity Natural

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Can any of the company-specific risk be diversified away by investing in both Utilities Portfolio and Fidelity Natural 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 Utilities Portfolio and Fidelity Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Utilities Portfolio Utilities and Fidelity Natural Resources, you can compare the effects of market volatilities on Utilities Portfolio and Fidelity Natural 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 Utilities Portfolio with a short position of Fidelity Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utilities Portfolio and Fidelity Natural.

Diversification Opportunities for Utilities Portfolio and Fidelity Natural

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Utilities and Fidelity is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Portfolio Utilities and Fidelity Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Natural Res and Utilities 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 Utilities Portfolio Utilities are associated (or correlated) with Fidelity Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Natural Res has no effect on the direction of Utilities Portfolio i.e., Utilities Portfolio and Fidelity Natural go up and down completely randomly.

Pair Corralation between Utilities Portfolio and Fidelity Natural

Assuming the 90 days horizon Utilities Portfolio Utilities is expected to generate 1.1 times more return on investment than Fidelity Natural. However, Utilities Portfolio is 1.1 times more volatile than Fidelity Natural Resources. It trades about 0.14 of its potential returns per unit of risk. Fidelity Natural Resources is currently generating about 0.07 per unit of risk. If you would invest  11,761  in Utilities Portfolio Utilities on September 10, 2024 and sell it today you would earn a total of  1,158  from holding Utilities Portfolio Utilities or generate 9.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Utilities Portfolio Utilities  vs.  Fidelity Natural Resources

 Performance 
       Timeline  
Utilities Portfolio 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Portfolio Utilities are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Utilities Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Fidelity Natural Res 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Natural Resources are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Utilities Portfolio and Fidelity Natural Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Utilities Portfolio and Fidelity Natural

The main advantage of trading using opposite Utilities Portfolio and Fidelity Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Utilities Portfolio position performs unexpectedly, Fidelity Natural 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 Natural will offset losses from the drop in Fidelity Natural's long position.
The idea behind Utilities Portfolio Utilities and Fidelity Natural Resources 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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