Correlation Between IShares Core and Fidelity Sustainable

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

By analyzing existing cross correlation between iShares Core 1 5 and Fidelity Sustainable Core, you can compare the effects of market volatilities on IShares Core and Fidelity Sustainable 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 IShares Core with a short position of Fidelity Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Fidelity Sustainable.

Diversification Opportunities for IShares Core and Fidelity Sustainable

0.93

Correlation Coefficient

IShares Core  Fidelity Sustainable

Almost no diversification

The 3 months correlation between IShares and Fidelity is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core 1 5 and Fidelity Sustainable Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Sustainable Core and IShares Core 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 iShares Core 1 5 are associated (or correlated) with Fidelity Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Sustainable Core has no effect on the direction of IShares Core i.e., IShares Core and Fidelity Sustainable go up and down completely randomly.

Pair Corralation between IShares Core and Fidelity Sustainable

Given the investment horizon of 90 days IShares Core is expected to generate 12.24 times less return on investment than Fidelity Sustainable. But when comparing it to its historical volatility, iShares Core 1 5 is 3.04 times less risky than Fidelity Sustainable. It trades about 0.04 of its potential returns per unit of risk. Fidelity Sustainable Core is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,683  in Fidelity Sustainable Core on September 4, 2024 and sell it today you would earn a total of  85.00  from holding Fidelity Sustainable Core or generate 1.82% return on investment over 90 days.

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

iShares Core 1 5  vs.  Fidelity Sustainable Core

iShares Core 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core 1 5 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Sustainable Core

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Sustainable Core are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Fidelity Sustainable is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Core and Fidelity Sustainable

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

The idea behind iShares Core 1 5 and Fidelity Sustainable Core 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.