Correlation Between Fidelity 500 and Dynamic International

Can any of the company-specific risk be diversified away by investing in both Fidelity 500 and Dynamic International 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 500 and Dynamic International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fidelity 500 Index and Dynamic International Opportunity, you can compare the effects of market volatilities on Fidelity 500 and Dynamic International 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 500 with a short position of Dynamic International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity 500 and Dynamic International.

Diversification Opportunities for Fidelity 500 and Dynamic International

-0.29

Correlation Coefficient

Fidelity 500  Dynamic International

Very good diversification

The 3 months correlation between Fidelity and Dynamic is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity 500 Index and Dynamic International Opportun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic International and Fidelity 500 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 500 Index are associated (or correlated) with Dynamic International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic International has no effect on the direction of Fidelity 500 i.e., Fidelity 500 and Dynamic International go up and down completely randomly.

Pair Corralation between Fidelity 500 and Dynamic International

Assuming the 90 days horizon Fidelity 500 Index is expected to under-perform the Dynamic International. In addition to that, Fidelity 500 is 1.3 times more volatile than Dynamic International Opportunity. It trades about -0.08 of its total potential returns per unit of risk. Dynamic International Opportunity is currently generating about 0.14 per unit of volatility. If you would invest  1,177  in Dynamic International Opportunity on December 22, 2024 and sell it today you would earn a total of  76.00  from holding Dynamic International Opportunity or generate 6.46% return on investment over 90 days.

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

Fidelity 500 Index  vs.  Dynamic International Opportun

Fidelity 500 Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity 500 Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Fidelity 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dynamic International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic International Opportunity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dynamic International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fidelity 500 and Dynamic International

The main advantage of trading using opposite Fidelity 500 and Dynamic International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity 500 position performs unexpectedly, Dynamic International 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 Dynamic International will offset losses from the drop in Dynamic International's long position.

The idea behind Fidelity 500 Index and Dynamic International Opportunity 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.