Correlation Between Fidelity Value and Fidelity Mega

Can any of the company-specific risk be diversified away by investing in both Fidelity Value 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 Value 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 Value Discovery and Fidelity Mega Cap, you can compare the effects of market volatilities on Fidelity Value 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 Value with a short position of Fidelity Mega. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Value and Fidelity Mega.

Diversification Opportunities for Fidelity Value and Fidelity Mega

0.52

Correlation Coefficient

Fidelity Value  Fidelity Mega

Very weak diversification

The 3 months correlation between Fidelity and FIDELITY is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Value Discovery 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 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 Discovery 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 Value i.e., Fidelity Value and Fidelity Mega go up and down completely randomly.

Pair Corralation between Fidelity Value and Fidelity Mega

Assuming the 90 days horizon Fidelity Value Discovery is expected to under-perform the Fidelity Mega. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity Value Discovery is 1.29 times less risky than Fidelity Mega. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Fidelity Mega Cap is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,655  in Fidelity Mega Cap on December 2, 2024 and sell it today you would lose (13.00) from holding Fidelity Mega Cap or give up 0.49% of portfolio value over 90 days.

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

Fidelity Value Discovery  vs.  Fidelity Mega Cap

Fidelity Value Discovery

Risk-Adjusted Performance

Very Weak

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

The main advantage of trading using opposite Fidelity Value and Fidelity Mega positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Value 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 Value Discovery 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.