Correlation Between Fidelity Value and AB Low

Can any of the company-specific risk be diversified away by investing in both Fidelity Value and AB Low 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 AB Low 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 AB Low Volatility, you can compare the effects of market volatilities on Fidelity Value and AB Low 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 AB Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Value and AB Low.

Diversification Opportunities for Fidelity Value and AB Low

0.95

Correlation Coefficient

Fidelity Value  AB Low

Almost no diversification

The 3 months correlation between Fidelity and LOWV is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Value Factor and AB Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Low Volatility 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 AB Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Low Volatility has no effect on the direction of Fidelity Value i.e., Fidelity Value and AB Low go up and down completely randomly.

Pair Corralation between Fidelity Value and AB Low

Given the investment horizon of 90 days Fidelity Value Factor is expected to generate about the same return on investment as AB Low Volatility. However, Fidelity Value is 1.14 times more volatile than AB Low Volatility. It trades about 0.1 of its potential returns per unit of risk. AB Low Volatility is currently producing about 0.12 per unit of risk. If you would invest  5,420  in AB Low Volatility on October 24, 2024 and sell it today you would earn a total of  1,775  from holding AB Low Volatility or generate 32.75% return on investment over 90 days.

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

Fidelity Value Factor  vs.  AB Low Volatility

Fidelity Value Factor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Value Factor are ranked lower than 6 (%) 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.

AB Low Volatility

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AB Low Volatility are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, AB Low is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fidelity Value and AB Low

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

The idea behind Fidelity Value Factor and AB Low Volatility 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.