Correlation Between Fidelity Value and Fidelity High

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

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

Diversification Opportunities for Fidelity Value and Fidelity High

0.92

Correlation Coefficient

Fidelity Value  Fidelity High

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Value Factor and Fidelity High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity High Dividend and Fidelity Value 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 Value Factor are associated (or correlated) with Fidelity High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity High Dividend has no effect on the direction of Fidelity Value i.e., Fidelity Value and Fidelity High go up and down completely randomly.

Pair Corralation between Fidelity Value and Fidelity High

Given the investment horizon of 90 days Fidelity Value Factor is expected to generate 0.91 times more return on investment than Fidelity High. However, Fidelity Value Factor is 1.1 times less risky than Fidelity High. It trades about -0.11 of its potential returns per unit of risk. Fidelity High Dividend is currently generating about -0.23 per unit of risk. If you would invest  6,254  in Fidelity Value Factor on September 19, 2024 and sell it today you would lose (97.00) from holding Fidelity Value Factor or give up 1.55% of portfolio value over 90 days.

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

Fidelity Value Factor  vs.  Fidelity High Dividend

Fidelity Value Factor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Value Factor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Fidelity Value is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Fidelity High Dividend

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity High Dividend are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Fidelity High is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fidelity Value and Fidelity High

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

The idea behind Fidelity Value Factor and Fidelity High Dividend 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.