Correlation Between Ultra Short and Fidelity Contrafund

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

By analyzing existing cross correlation between Ultra Short Income and Fidelity Contrafund, you can compare the effects of market volatilities on Ultra Short and Fidelity Contrafund 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 Ultra Short with a short position of Fidelity Contrafund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Short and Fidelity Contrafund.

Diversification Opportunities for Ultra Short and Fidelity Contrafund

0.77

Correlation Coefficient

Ultra Short  Fidelity Contrafund

Poor diversification

The 3 months correlation between Ultra and Fidelity is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Short Income and Fidelity Contrafund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Contrafund and Ultra Short 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 Ultra Short Income are associated (or correlated) with Fidelity Contrafund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Contrafund has no effect on the direction of Ultra Short i.e., Ultra Short and Fidelity Contrafund go up and down completely randomly.

Pair Corralation between Ultra Short and Fidelity Contrafund

Assuming the 90 days horizon Ultra Short is expected to generate 5.78 times less return on investment than Fidelity Contrafund. But when comparing it to its historical volatility, Ultra Short Income is 13.1 times less risky than Fidelity Contrafund. It trades about 0.18 of its potential returns per unit of risk. Fidelity Contrafund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,052  in Fidelity Contrafund on October 10, 2024 and sell it today you would earn a total of  92.00  from holding Fidelity Contrafund or generate 4.48% return on investment over 90 days.

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

Ultra Short Income  vs.  Fidelity Contrafund

Ultra Short Income

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Short Income are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ultra Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Contrafund

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Contrafund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Contrafund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ultra Short and Fidelity Contrafund

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

The idea behind Ultra Short Income and Fidelity Contrafund 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.