Correlation Between Fidelity Focused and Fidelity Mega

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

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

Diversification Opportunities for Fidelity Focused and Fidelity Mega

0.9

Correlation Coefficient

Fidelity Focused  Fidelity Mega

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Focused Stock and Fidelity Mega Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Mega Cap and Fidelity Focused 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 Focused Stock are associated (or correlated) with Fidelity Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Mega Cap has no effect on the direction of Fidelity Focused i.e., Fidelity Focused and Fidelity Mega go up and down completely randomly.

Pair Corralation between Fidelity Focused and Fidelity Mega

Assuming the 90 days horizon Fidelity Focused Stock is expected to under-perform the Fidelity Mega. In addition to that, Fidelity Focused is 1.64 times more volatile than Fidelity Mega Cap. It trades about -0.11 of its total potential returns per unit of risk. Fidelity Mega Cap is currently generating about -0.04 per unit of volatility. If you would invest  2,572  in Fidelity Mega Cap on December 30, 2024 and sell it today you would lose (70.00) from holding Fidelity Mega Cap or give up 2.72% of portfolio value over 90 days.

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

Fidelity Focused Stock  vs.  Fidelity Mega Cap

Fidelity Focused Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Focused Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Fidelity Mega Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Mega Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Mega 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 Focused and Fidelity Mega

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

The idea behind Fidelity Focused Stock and Fidelity Mega Cap 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.