Correlation Between IShares Core and Fidelity Value

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

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

Diversification Opportunities for IShares Core and Fidelity Value

0.85

Correlation Coefficient

IShares Core  Fidelity Value

Very poor diversification

The 3 months correlation between IShares and Fidelity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Fidelity Value Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Value Factor 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 SP 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 Factor has no effect on the direction of IShares Core i.e., IShares Core and Fidelity Value go up and down completely randomly.

Pair Corralation between IShares Core and Fidelity Value

Given the investment horizon of 90 days IShares Core is expected to generate 1.28 times less return on investment than Fidelity Value. But when comparing it to its historical volatility, iShares Core SP is 1.02 times less risky than Fidelity Value. It trades about 0.08 of its potential returns per unit of risk. Fidelity Value Factor is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,254  in Fidelity Value Factor on September 19, 2024 and sell it today you would earn a total of  2,053  from holding Fidelity Value Factor or generate 48.26% return on investment over 90 days.

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

iShares Core SP  vs.  Fidelity Value Factor

iShares Core SP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Fidelity Value Factor

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Value Factor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Fidelity Value is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Core and Fidelity Value

The main advantage of trading using opposite IShares Core and Fidelity Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core SP and Fidelity Value Factor 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.