Correlation Between Fidelity and Fidelity Climate

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

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

Diversification Opportunities for Fidelity and Fidelity Climate

0.51

Correlation Coefficient

Fidelity  Fidelity Climate

Very weak diversification

The 3 months correlation between Fidelity and Fidelity is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Low Volatility and Fidelity Climate Action in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Climate Action and Fidelity 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 Low Volatility are associated (or correlated) with Fidelity Climate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Climate Action has no effect on the direction of Fidelity i.e., Fidelity and Fidelity Climate go up and down completely randomly.

Pair Corralation between Fidelity and Fidelity Climate

Assuming the 90 days horizon Fidelity is expected to generate 2.01 times less return on investment than Fidelity Climate. But when comparing it to its historical volatility, Fidelity Low Volatility is 1.69 times less risky than Fidelity Climate. It trades about 0.07 of its potential returns per unit of risk. Fidelity Climate Action is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,068  in Fidelity Climate Action on October 12, 2024 and sell it today you would earn a total of  173.00  from holding Fidelity Climate Action or generate 16.2% return on investment over 90 days.

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

Fidelity Low Volatility  vs.  Fidelity Climate Action

Fidelity Low Volatility

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Climate Action

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Climate Action has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Fidelity Climate 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 and Fidelity Climate

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

The idea behind Fidelity Low Volatility and Fidelity Climate Action 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.