Correlation Between Fidelity Total and Fidelity Sustainability

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

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

Diversification Opportunities for Fidelity Total and Fidelity Sustainability

1.0

Correlation Coefficient

Fidelity Total  Fidelity Sustainability

No risk reduction

The 3 months correlation between FIDELITY and FIDELITY is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Total Bond and Fidelity Sustainability Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Sustainability and Fidelity Total 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 Total Bond are associated (or correlated) with Fidelity Sustainability. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Sustainability has no effect on the direction of Fidelity Total i.e., Fidelity Total and Fidelity Sustainability go up and down completely randomly.

Pair Corralation between Fidelity Total and Fidelity Sustainability

Assuming the 90 days horizon Fidelity Total is expected to generate 1.03 times less return on investment than Fidelity Sustainability. But when comparing it to its historical volatility, Fidelity Total Bond is 1.02 times less risky than Fidelity Sustainability. It trades about 0.13 of its potential returns per unit of risk. Fidelity Sustainability Bond is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  906.00  in Fidelity Sustainability Bond on December 30, 2024 and sell it today you would earn a total of  22.00  from holding Fidelity Sustainability Bond or generate 2.43% return on investment over 90 days.

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

Fidelity Total Bond  vs.  Fidelity Sustainability Bond

Fidelity Total Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Total Bond are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Fidelity Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Sustainability

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Sustainability Bond are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Sustainability 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 Total and Fidelity Sustainability

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

The idea behind Fidelity Total Bond and Fidelity Sustainability Bond 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.