Correlation Between Large Cap and Fidelity Managed

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

By analyzing existing cross correlation between Large Cap Growth Profund and Fidelity Managed Retirement, you can compare the effects of market volatilities on Large Cap and Fidelity Managed 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 Large Cap with a short position of Fidelity Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Fidelity Managed.

Diversification Opportunities for Large Cap and Fidelity Managed

-0.29

Correlation Coefficient

Large Cap  Fidelity Managed

Very good diversification

The 3 months correlation between Large and Fidelity is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund and Fidelity Managed Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Managed Ret and Large Cap 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 Large Cap Growth Profund are associated (or correlated) with Fidelity Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Managed Ret has no effect on the direction of Large Cap i.e., Large Cap and Fidelity Managed go up and down completely randomly.

Pair Corralation between Large Cap and Fidelity Managed

Assuming the 90 days horizon Large Cap Growth Profund is expected to under-perform the Fidelity Managed. In addition to that, Large Cap is 5.49 times more volatile than Fidelity Managed Retirement. It trades about -0.11 of its total potential returns per unit of risk. Fidelity Managed Retirement is currently generating about 0.16 per unit of volatility. If you would invest  5,274  in Fidelity Managed Retirement on December 22, 2024 and sell it today you would earn a total of  132.00  from holding Fidelity Managed Retirement or generate 2.5% return on investment over 90 days.

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

Large Cap Growth Profund  vs.  Fidelity Managed Retirement

Large Cap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Cap Growth Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Fidelity Managed Ret

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Managed Retirement are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Fidelity Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Large Cap and Fidelity Managed

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

The idea behind Large Cap Growth Profund and Fidelity Managed Retirement 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.