Correlation Between IShares SP and Fidelity Dividend

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

By analyzing existing cross correlation between iShares SP 500 and Fidelity Dividend ETF, you can compare the effects of market volatilities on IShares SP and Fidelity Dividend 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 SP with a short position of Fidelity Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Fidelity Dividend.

Diversification Opportunities for IShares SP and Fidelity Dividend

0.8

Correlation Coefficient

IShares SP  Fidelity Dividend

Very poor diversification

The 3 months correlation between IShares and Fidelity is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Fidelity Dividend ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Dividend ETF and IShares SP 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 SP 500 are associated (or correlated) with Fidelity Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Dividend ETF has no effect on the direction of IShares SP i.e., IShares SP and Fidelity Dividend go up and down completely randomly.

Pair Corralation between IShares SP and Fidelity Dividend

Considering the 90-day investment horizon iShares SP 500 is expected to under-perform the Fidelity Dividend. But the etf apears to be less risky and, when comparing its historical volatility, iShares SP 500 is 1.09 times less risky than Fidelity Dividend. The etf trades about -0.31 of its potential returns per unit of risk. The Fidelity Dividend ETF is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  5,249  in Fidelity Dividend ETF on September 19, 2024 and sell it today you would lose (105.00) from holding Fidelity Dividend ETF or give up 2.0% of portfolio value over 90 days.

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

iShares SP 500  vs.  Fidelity Dividend ETF

iShares SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fidelity Dividend ETF

Risk-Adjusted Performance

2 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Dividend ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Fidelity Dividend is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares SP and Fidelity Dividend

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

The idea behind iShares SP 500 and Fidelity Dividend 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.