Correlation Between T Rowe and Fidelity Contrafund

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

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

Diversification Opportunities for T Rowe and Fidelity Contrafund

0.89

Correlation Coefficient

T Rowe  Fidelity Contrafund

Very poor diversification

The 3 months correlation between PRMTX and Fidelity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Fidelity Contrafund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Contrafund and T Rowe 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 T Rowe Price 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 T Rowe i.e., T Rowe and Fidelity Contrafund go up and down completely randomly.

Pair Corralation between T Rowe and Fidelity Contrafund

Assuming the 90 days horizon T Rowe is expected to generate 1.28 times less return on investment than Fidelity Contrafund. In addition to that, T Rowe is 1.16 times more volatile than Fidelity Contrafund. It trades about 0.09 of its total potential returns per unit of risk. Fidelity Contrafund is currently generating about 0.13 per unit of volatility. If you would invest  1,182  in Fidelity Contrafund on October 10, 2024 and sell it today you would earn a total of  991.00  from holding Fidelity Contrafund or generate 83.84% return on investment over 90 days.

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

T Rowe Price  vs.  Fidelity Contrafund

T Rowe Price

Risk-Adjusted Performance

1 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, T Rowe 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

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Contrafund are ranked lower than 8 (%) 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 T Rowe and Fidelity Contrafund

The main advantage of trading using opposite T Rowe and Fidelity Contrafund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe 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 T Rowe Price 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.