Correlation Between IShares Trust and Fidelity Low

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

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

Diversification Opportunities for IShares Trust and Fidelity Low

0.41

Correlation Coefficient

IShares Trust  Fidelity Low

Very weak diversification

The 3 months correlation between IShares and Fidelity is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Fidelity Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Low Duration and IShares Trust 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 Trust are associated (or correlated) with Fidelity Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Low Duration has no effect on the direction of IShares Trust i.e., IShares Trust and Fidelity Low go up and down completely randomly.

Pair Corralation between IShares Trust and Fidelity Low

Given the investment horizon of 90 days iShares Trust is expected to under-perform the Fidelity Low. In addition to that, IShares Trust is 16.16 times more volatile than Fidelity Low Duration. It trades about -0.04 of its total potential returns per unit of risk. Fidelity Low Duration is currently generating about 0.32 per unit of volatility. If you would invest  5,030  in Fidelity Low Duration on December 5, 2024 and sell it today you would earn a total of  12.00  from holding Fidelity Low Duration or generate 0.24% return on investment over 90 days.

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

iShares Trust  vs.  Fidelity Low Duration

iShares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fidelity Low Duration

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Low Duration are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Fidelity Low is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Trust and Fidelity Low

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

The idea behind iShares Trust and Fidelity Low Duration 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.