Correlation Between Morningstar Defensive and Fidelity Series

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

By analyzing existing cross correlation between Morningstar Defensive Bond and Fidelity Series Floating, you can compare the effects of market volatilities on Morningstar Defensive and Fidelity Series 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 Morningstar Defensive with a short position of Fidelity Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Defensive and Fidelity Series.

Diversification Opportunities for Morningstar Defensive and Fidelity Series

0.05

Correlation Coefficient

Morningstar Defensive  Fidelity Series

Significant diversification

The 3 months correlation between Morningstar and Fidelity is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Defensive Bond and Fidelity Series Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Series Floating and Morningstar Defensive 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 Morningstar Defensive Bond are associated (or correlated) with Fidelity Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Series Floating has no effect on the direction of Morningstar Defensive i.e., Morningstar Defensive and Fidelity Series go up and down completely randomly.

Pair Corralation between Morningstar Defensive and Fidelity Series

Assuming the 90 days horizon Morningstar Defensive Bond is expected to generate 0.89 times more return on investment than Fidelity Series. However, Morningstar Defensive Bond is 1.13 times less risky than Fidelity Series. It trades about 0.15 of its potential returns per unit of risk. Fidelity Series Floating is currently generating about 0.05 per unit of risk. If you would invest  966.00  in Morningstar Defensive Bond on December 2, 2024 and sell it today you would earn a total of  12.00  from holding Morningstar Defensive Bond or generate 1.24% return on investment over 90 days.

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

Morningstar Defensive Bond  vs.  Fidelity Series Floating

Morningstar Defensive

Risk-Adjusted Performance

Good

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

Fidelity Series Floating

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Series Floating are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fidelity Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morningstar Defensive and Fidelity Series

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

The idea behind Morningstar Defensive Bond and Fidelity Series Floating 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.