Correlation Between SPTSX Dividend and Fidelity Value

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

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

Diversification Opportunities for SPTSX Dividend and Fidelity Value

0.25

Correlation Coefficient

SPTSX Dividend  Fidelity Value

Modest diversification

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

Pair Corralation between SPTSX Dividend and Fidelity Value

Assuming the 90 days trading horizon SPTSX Dividend Aristocrats is expected to under-perform the Fidelity Value. But the index apears to be less risky and, when comparing its historical volatility, SPTSX Dividend Aristocrats is 1.45 times less risky than Fidelity Value. The index trades about -0.02 of its potential returns per unit of risk. The Fidelity Value ETF is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,018  in Fidelity Value ETF on December 25, 2024 and sell it today you would earn a total of  29.00  from holding Fidelity Value ETF or generate 1.44% return on investment over 90 days.

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

SPTSX Dividend Aristocrats  vs.  Fidelity Value ETF

Pair Trading with SPTSX Dividend and Fidelity Value

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

The idea behind SPTSX Dividend Aristocrats and Fidelity Value ETF 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.