Correlation Between Fidelity 500 and T Rowe

Can any of the company-specific risk be diversified away by investing in both Fidelity 500 and T Rowe 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 T Rowe 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 T Rowe Price, you can compare the effects of market volatilities on Fidelity 500 and T Rowe 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 T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity 500 and T Rowe.

Diversification Opportunities for Fidelity 500 and T Rowe

0.25

Correlation Coefficient

Fidelity 500  T Rowe

Modest diversification

The 3 months correlation between Fidelity and RPIEX is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity 500 Index and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price 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 T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Fidelity 500 i.e., Fidelity 500 and T Rowe go up and down completely randomly.

Pair Corralation between Fidelity 500 and T Rowe

Assuming the 90 days horizon Fidelity 500 Index is expected to generate 4.86 times more return on investment than T Rowe. However, Fidelity 500 is 4.86 times more volatile than T Rowe Price. It trades about 0.1 of its potential returns per unit of risk. T Rowe Price is currently generating about 0.18 per unit of risk. If you would invest  20,111  in Fidelity 500 Index on October 25, 2024 and sell it today you would earn a total of  1,031  from holding Fidelity 500 Index or generate 5.13% return on investment over 90 days.

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

Fidelity 500 Index  vs.  T Rowe Price

Fidelity 500 Index

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity 500 Index are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. 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.

T Rowe Price

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, T Rowe 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 500 and T Rowe

The main advantage of trading using opposite Fidelity 500 and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity 500 position performs unexpectedly, T Rowe 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 T Rowe will offset losses from the drop in T Rowe's long position.

The idea behind Fidelity 500 Index and T Rowe Price 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.