Correlation Between Fidelity Trend and Fidelity Disciplined

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

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

Diversification Opportunities for Fidelity Trend and Fidelity Disciplined

0.8

Correlation Coefficient

Fidelity Trend  Fidelity Disciplined

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Trend Fund and Fidelity Disciplined Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Disciplined and Fidelity Trend 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 Trend Fund are associated (or correlated) with Fidelity Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Disciplined has no effect on the direction of Fidelity Trend i.e., Fidelity Trend and Fidelity Disciplined go up and down completely randomly.

Pair Corralation between Fidelity Trend and Fidelity Disciplined

Assuming the 90 days horizon Fidelity Trend Fund is expected to under-perform the Fidelity Disciplined. In addition to that, Fidelity Trend is 1.39 times more volatile than Fidelity Disciplined Equity. It trades about -0.16 of its total potential returns per unit of risk. Fidelity Disciplined Equity is currently generating about -0.12 per unit of volatility. If you would invest  7,521  in Fidelity Disciplined Equity on December 1, 2024 and sell it today you would lose (847.00) from holding Fidelity Disciplined Equity or give up 11.26% of portfolio value over 90 days.

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

Fidelity Trend Fund  vs.  Fidelity Disciplined Equity

Fidelity Trend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Trend Fund 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 Disciplined

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Fidelity Trend and Fidelity Disciplined

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

The idea behind Fidelity Trend Fund and Fidelity Disciplined Equity 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 CEOs Directory module to screen CEOs from public companies around the world.