Correlation Between Nasdaq and Fidelity Equity-income

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

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

Diversification Opportunities for Nasdaq and Fidelity Equity-income

0.67

Correlation Coefficient

Nasdaq  Fidelity Equity-income

Poor diversification

The 3 months correlation between Nasdaq and Fidelity is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Fidelity Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Equity Income and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Fidelity Equity-income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Equity Income has no effect on the direction of Nasdaq i.e., Nasdaq and Fidelity Equity-income go up and down completely randomly.

Pair Corralation between Nasdaq and Fidelity Equity-income

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Fidelity Equity-income. In addition to that, Nasdaq is 2.01 times more volatile than Fidelity Equity Income Fund. It trades about -0.01 of its total potential returns per unit of risk. Fidelity Equity Income Fund is currently generating about 0.06 per unit of volatility. If you would invest  7,469  in Fidelity Equity Income Fund on December 26, 2024 and sell it today you would earn a total of  168.00  from holding Fidelity Equity Income Fund or generate 2.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Nasdaq Inc  vs.  Fidelity Equity Income Fund

Nasdaq Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Fidelity Equity Income

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Equity Income Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Fidelity Equity-income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Fidelity Equity-income

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

The idea behind Nasdaq Inc and Fidelity Equity Income Fund 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.